It looks like BGC Partners, Inc. (NASDAQ:BGCP) is about to go ex-dividend in the next 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, BGC Partners investors that purchase the stock on or after the 18th of May will not receive the dividend, which will be paid on the 2nd of June.
The company's next dividend payment will be US$0.01 per share. Last year, in total, the company distributed US$0.04 to shareholders. Based on the last year's worth of payments, BGC Partners has a trailing yield of 0.8% on the current stock price of $5.31. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether BGC Partners can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. BGC Partners has a low and conservative payout ratio of just 19% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by BGC Partners's 20% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. BGC Partners's dividend payments per share have declined at 23% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid BGC Partners? BGC Partners's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We think there are likely better opportunities out there.
If you're not too concerned about BGC Partners's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 3 warning signs for BGC Partners and you should be aware of these before buying any shares.
If you're in the market for dividend stocks, we recommend checking our list of top 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.
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