Readers hoping to buy Bristol-Myers Squibb Company (NYSE:BMY) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 3rd of October in order to receive the dividend, which the company will pay on the 1st of November.
Bristol-Myers Squibb's upcoming dividend is US$0.4 a share, following on from the last 12 months, when the company distributed a total of US$1.6 per share to shareholders. Based on the last year's worth of payments, Bristol-Myers Squibb has a trailing yield of 3.3% on the current stock price of $50.22. If you buy this business for its dividend, you should have an idea of whether Bristol-Myers Squibb's dividend is reliable and sustainable. As a result, readers should always check whether Bristol-Myers Squibb 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. Bristol-Myers Squibb paid out a comfortable 43% of its profit last year. A useful secondary check can be to evaluate whether Bristol-Myers Squibb generated enough free cash flow to afford its dividend. Fortunately, it paid out only 42% of its free cash flow in the past 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?
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Bristol-Myers Squibb's earnings per share have been growing at 19% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Bristol-Myers Squibb has lifted its dividend by approximately 2.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Bristol-Myers Squibb is keeping back more of its profits to grow the business.
Is Bristol-Myers Squibb worth buying for its dividend? Bristol-Myers Squibb 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. It's a promising combination that should mark this company worthy of closer attention.
Curious what other investors think of Bristol-Myers Squibb? See what analysts 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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