Readers wishing to buy Yellow Pages Limited (TSE: Y) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for the payment of a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not appear on the books of the company on the date of registration. This means that you will need to buy Yellow Pages shares by June 8 to receive the dividend, which will be paid on June 30.
The company’s next dividend payment will be C $ 0.15 per share, compared to last year when the company paid a total of C $ 0.60 to shareholders. Last year’s total dividend payouts show Yellow Pages has a 4.0% return on the current C $ 15.1 share price. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. You have to see if the dividend is covered by profits and if it increases.
Check out our latest analysis for the yellow pages
Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. The Yellow Pages paid only 21% of their profits last year, which in our opinion is moderately low and leaves a lot of room for unexpected circumstances. A useful secondary check may be to assess whether the Yellow Pages have generated enough free cash flow to pay its dividend. It paid 10% of its free cash flow as dividends last year, which is conservative.
It is positive to see that the Yellow Pages dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher. margin of safety before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies that don’t increase their profits can still be valuable, but it’s even more important to assess the sustainability of the dividend if it looks like the business will be struggling to grow. If profits fall enough, the company could be forced to cut its dividend. This explains why we are not too excited about the stable revenues of the Yellow Pages over the past five years. Better than seeing them fall off a cliff, of course, but the best dividend-paying stocks increase their earnings significantly over the long term.
Since the Yellow Pages have only been paying a dividend for a year, there isn’t much of history to glance at.
Are the Yellow Pages an attractive dividend-paying stock, or rather left on the shelf? While it’s not great to see that earnings per share are indeed stable over the one-year period we’ve audited, at least the payout ratios are low and conservative. To sum up, the Yellow Pages looks good on this analysis, although it doesn’t seem like a remarkable opportunity.
In light of this, while the Yellow Pages have an attractive dividend, it’s worth knowing the risks associated with this stock. For example, we found 2 warning signs for yellow pages which we recommend that you consider before investing in the business.
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