Tempur Sealy International, Inc. (NYSE:TPX) Passed Our Checks, And It's About To Pay A US$0.11 Dividend
It looks like Tempur Sealy International, Inc. (NYSE:TPX) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Tempur Sealy International's shares before the 22nd of May in order to receive the dividend, which the company will pay on the 6th of June.
The company's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.44 per share. Based on the last year's worth of payments, Tempur Sealy International has a trailing yield of 1.1% on the current stock price of $38.31. If you buy this business for its dividend, you should have an idea of whether Tempur Sealy International's dividend is reliable and sustainable. So we need to investigate whether Tempur Sealy International can afford its dividend, and if the dividend could grow.
See our latest analysis for Tempur Sealy International
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tempur Sealy International paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Tempur Sealy International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Tempur Sealy International's earnings have been skyrocketing, up 23% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Tempur Sealy International has lifted its dividend by approximately 25% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Should investors buy Tempur Sealy International for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Tempur Sealy International paid out less than half its earnings and a bit over half its free cash flow. Tempur Sealy International looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Tempur Sealy International is facing. Every company has risks, and we've spotted 2 warning signs for Tempur Sealy International (of which 1 is a bit concerning!) you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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