WESCO International, Inc. (NYSE:WCC) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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 WESCO International's shares before the 14th of December in order to be eligible for the dividend, which will be paid on the 29th of December.
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$1.50 per share to shareholders. Based on the last year's worth of payments, WESCO International stock has a trailing yield of around 0.9% on the current share price of $160.96. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether WESCO International 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. WESCO International is paying out just 7.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether WESCO International generated enough free cash flow to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 WESCO International's earnings have been skyrocketing, up 35% per annum for the past five years. WESCO International looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Given that WESCO International has only been paying a dividend for a year, there's not much of a past history to draw insight from.
Is WESCO International an attractive dividend stock, or better left on the shelf? WESCO International has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about WESCO International, and we would prioritise taking a closer look at it.
In light of that, while WESCO International has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for WESCO International (1 is concerning!) that you ought to be aware of before buying the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.