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Why You Might Be Interested In Motorola Solutions, Inc. (NYSE:MSI) For Its Upcoming Dividend

Simply Wall St
·4 mins read

Motorola Solutions, Inc. (NYSE:MSI) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 14th of September will not receive the dividend, which will be paid on the 15th of October.

Motorola Solutions's next dividend payment will be US$0.64 per share, and in the last 12 months, the company paid a total of US$2.56 per share. Based on the last year's worth of payments, Motorola Solutions has a trailing yield of 1.7% on the current stock price of $152.49. 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 Motorola Solutions has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Motorola Solutions

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. Motorola Solutions paid out 50% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. That's why it's comforting to see Motorola Solutions's earnings have been skyrocketing, up 30% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, Motorola Solutions has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Motorola Solutions got what it takes to maintain its dividend payments? Motorola Solutions's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Motorola Solutions looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Motorola Solutions for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 4 warning signs with Motorola Solutions and understanding them should be part of your investment process.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.