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Is It Worth Considering DENTSPLY SIRONA Inc. (NASDAQ:XRAY) For Its Upcoming Dividend?

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 26th of March will not receive this dividend, which will be paid on the 10th of April.

DENTSPLY SIRONA's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Last year's total dividend payments show that DENTSPLY SIRONA has a trailing yield of 1.2% on the current share price of $32.82. 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! As a result, readers should always check whether DENTSPLY SIRONA has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for DENTSPLY SIRONA

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. That's why it's good to see DENTSPLY SIRONA paying out a modest 32% of its earnings. 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. Luckily it paid out just 16% of its free cash flow last year.

It's positive to see that DENTSPLY SIRONA's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

NasdaqGS:XRAY Historical Dividend Yield, March 21st 2020

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. DENTSPLY SIRONA's earnings per share have fallen at approximately 12% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DENTSPLY SIRONA has delivered an average of 7.2% per year annual increase in its dividend, based on the past ten years of dividend payments.

The Bottom Line

Is DENTSPLY SIRONA worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while DENTSPLY SIRONA has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with DENTSPLY SIRONA 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.