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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cactus, Inc. (NYSE:WHD) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 28th of February to receive the dividend, which will be paid on the 19th of March.
Cactus's next dividend payment will be US$0.09 per share, on the back of last year when the company paid a total of US$0.36 to shareholders. Looking at the last 12 months of distributions, Cactus has a trailing yield of approximately 1.3% on its current stock price of $28.79. 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 check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 4.2% of its cash flow last year.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Cactus's earnings per share have plummeted approximately 64% a year over the previous five years.
This is Cactus's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
To Sum It Up
Is Cactus an attractive dividend stock, or better left on the shelf? Cactus has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about Cactus from a dividend perspective.
Ever wonder what the future holds for Cactus? See what the ten analysts we track 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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