Limited Trident (NSE: TRIDENT) is set to trade ex-dividend within the next 3 days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a 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. In other words, investors can buy Trident shares before October 28 so they can claim the dividend that will be paid on November 19.
The company’s upcoming dividend is 0.36 per share, continuing the past 12 months when the company has distributed a total of 0.36 per share to shareholders. Based on the value of last year’s payouts, the Trident share has a rolling return of around 0.9% on the current share price of 40.55. If you are buying this company for its dividend, you should know if Trident’s dividend is reliable and sustainable. Therefore, readers should always check to see if Trident was able to increase its dividends or if the dividend could be reduced.
See our latest review for Trident
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. That’s why it’s good to see Trident donate a modest 28% of its earnings. 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. Over the past year, it has paid out 194% of its free cash flow as dividends, which is uncomfortably 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.
Trident paid less dividends than it made profits, but unfortunately it did not generate enough cash to cover the dividend. If this were to happen again, it would pose a risk to Trident’s ability to maintain its dividend.
Click here to see how much profit Trident has paid in the past 12 months.
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. That’s why it’s heartwarming to see that Trident’s revenue has skyrocketed, up 22% annually for the past five years. Profits have grown rapidly, but we’re concerned that dividend payments have consumed most of the company’s cash flow over the past year.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, Trident has increased its dividend by around 12% per year on average. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.
Should investors buy Trident for the next dividend? We like the fact that Trident has managed to grow its earnings per share at a good pace and reinvest most of its earnings back into the business. However, we note with some concern the high cash flow payout ratio. To sum up, Trident looks good on this scan, even if it doesn’t seem like an exceptional opportunity.
In light of this, while Trident has an attractive dividend, it’s worth knowing the risks involved in this stock. Every business has risks, and we have spotted 2 warning signs for Trident you should know.
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 the mentioned stocks.
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