There's A Lot To Like About Sinclair Broadcast Group's (NASDAQ:SBGI) Upcoming US$0.25 Dividend
It looks like Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Sinclair Broadcast Group's shares before the 31st of May in order to be eligible for the dividend, which will be paid on the 15th of June.
The company's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Based on the last year's worth of payments, Sinclair Broadcast Group has a trailing yield of 4.2% on the current stock price of $23.9. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Sinclair Broadcast Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sinclair Broadcast Group has a low and conservative payout ratio of just 2.9% of its income after tax. A useful secondary check can be to evaluate whether Sinclair Broadcast Group generated enough free cash flow to afford its dividend. The good news is it paid out just 12% of its free cash flow in the last year.
It's positive to see that Sinclair Broadcast Group'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 Sinclair Broadcast Group's earnings have been skyrocketing, up 64% per annum for the past five years. Sinclair Broadcast Group earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Sinclair Broadcast Group has increased its dividend at approximately 7.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Should investors buy Sinclair Broadcast Group for the upcoming dividend? We love that Sinclair Broadcast Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Sinclair Broadcast Group is showing 4 warning signs in our investment analysis, and 3 of those can't be ignored...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
