Ternium S.A. (NYSE:TX) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ternium S.A. (NYSE:TX) is about to trade ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 5th of May will not receive this dividend, which will be paid on the 14th of May.
Ternium's next dividend payment will be US$2.10 per share. Last year, in total, the company distributed US$2.10 to shareholders. Based on the last year's worth of payments, Ternium has a trailing yield of 5.4% on the current stock price of $39.09. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Ternium
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ternium paid out a comfortable 30% of its profit last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Ternium has grown its earnings rapidly, up 180% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
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, 10 years ago, Ternium has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Should investors buy Ternium for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Ternium looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Ternium has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Ternium (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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