Foley Wines Limited The stock (NZSE: FWL) is about to trade excluding dividend in 4 days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. Therefore, if you buy Foley Wines shares on or after October 7, you will not be able to receive the dividend when it is paid on October 22.
The upcoming dividend for Foley Wines will put a total of NZ $ 0.047 per share in the pockets of shareholders, up from last year’s total dividends of NZ $ 0.04. Dividends are an important source of income for many shareholders, but the health of the business is crucial to sustaining these dividends. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
Check out our latest review for Foley Wines
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Foley Wines paid 68% of its profits to investors last year, a normal payout level for most companies. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. Foley Wines paid more free cash flow than it generated – 127%, to be precise – last year, which we think is pretty high. It’s hard to consistently pay in more money than you generate without borrowing or using company cash, so we wonder how the company justifies this level of payment.
Foley Wines paid less dividends than it earned profits, but unfortunately it did not generate enough cash to cover the dividend. Money is king, as they say, and if Foley Wines were to repeatedly pay dividends that are not well covered by cash flow, we would take that as a warning sign.
Click here to see how much of its profits Foley Wines has paid in the past 12 months.
Have profits and dividends increased?
Companies with declining profits are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. Readers will then understand why we are concerned that Foley Wines earnings per share have fallen 9.1% per year over the past five years. Such a sudden drop casts doubt on the future sustainability of the dividend.
Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Foley Wines has recorded dividend growth of 12% per year on average over the past six years. Raising the dividend payout ratio as profits fall can generate good returns for a while, but it is always worth checking out when the company can no longer increase the payout ratio because the music then stops. .
Is Foley Wines Worth Buying For Its Dividend? Foley Wines had an average payout ratio, but its free cash flow was lower and its earnings per share declined. This is not an attractive combination from a dividend standpoint, and we are inclined to forgo this one for the time being.
That being said, if you are still considering Foley Wines as an investment, you will find it useful to know what risks this stock faces. Concrete example: we have spotted 3 warning signs for Foley wines you must be aware.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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