Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Penske Automotive Group, Inc. (NYSE:PAG) is about to trade ex-dividend in the next 2 days. Investors can purchase shares before the 21st of February in order to be eligible for this dividend, which will be paid on the 3rd of March.
Penske Automotive Group's next dividend payment will be US$0.42 per share, and in the last 12 months, the company paid a total of US$1.68 per share. Based on the last year's worth of payments, Penske Automotive Group has a trailing yield of 3.2% on the current stock price of $51.81. 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 investigate whether Penske Automotive Group can afford its dividend, and if the dividend could grow.
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. Penske Automotive Group paid out a comfortable 31% of its profit last year.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Penske Automotive Group, with earnings per share up 9.6% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Penske Automotive Group has lifted its dividend by approximately 22% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Has Penske Automotive Group got what it takes to maintain its dividend payments? Penske Automotive Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Penske Automotive Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for Penske Automotive Group? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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