US Ecology, Inc. (NASDAQ:ECOL) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 16th of January, you won't be eligible to receive this dividend, when it is paid on the 24th of January.
US Ecology's next dividend payment will be US$0.18 per share, and in the last 12 months, the company paid a total of US$0.72 per share. Based on the last year's worth of payments, US Ecology stock has a trailing yield of around 1.3% on the current share price of $55.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether US Ecology has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. US Ecology paid out a comfortable 31% of its profit last year. 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. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that US Ecology'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.
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. 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 US Ecology, with earnings per share up 5.8% 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. It looks like the US Ecology dividends are largely the same as they were ten years ago.
Has US Ecology got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and US Ecology is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but US Ecology is being conservative with its dividend payouts and could still perform reasonably over the long run. US Ecology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Wondering what the future holds for US Ecology? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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