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It looks like VOC Energy Trust (NYSE:VOC) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase VOC Energy Trust's shares before the 29th of July in order to be eligible for the dividend, which will be paid on the 12th of August.
The company's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$0.73 per share to shareholders. Based on the last year's worth of payments, VOC Energy Trust stock has a trailing yield of around 9.5% on the current share price of $7.7. If you buy this business for its dividend, you should have an idea of whether VOC Energy Trust's dividend is reliable and sustainable. So we need to investigate whether VOC Energy Trust can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. VOC Energy Trust distributed an unsustainably high 122% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
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. 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 VOC Energy Trust has grown its earnings rapidly, up 21% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. VOC Energy Trust has seen its dividend decline 11% per annum on average over the past 10 years, which is not great to see. VOC Energy Trust is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
Has VOC Energy Trust got what it takes to maintain its dividend payments? It's been growing earnings per share at a pleasant rate, although its dividend payout was not well covered by earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
So if you want to do more digging on VOC Energy Trust, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 2 warning signs for VOC Energy Trust (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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