Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Yellow Pages Limited (TSE: Y) is set to trade off dividend within the next four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. This means that investors who buy Yellow Pages shares from November 25 will not receive the dividend, which will be paid on December 15.
The company’s next dividend payment will be C $ 0.15 per share. Last year, in total, the company distributed CAD $ 0.60 to shareholders. Based on the value of last year’s payouts, the Yellow Pages share has a rolling yield of approximately 4.2% on the current share price of C $ 14.4. 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. Fortunately, the Yellow Pages payout ratio is modest, at just 30% of profits. A useful secondary check may be to assess whether the Yellow Pages have generated enough free cash flow to pay its dividend. The good thing is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with declining profits are tricky from a dividend standpoint. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. With that in mind, we are hampered by the 5.1% per year drop in Yellow Pages profits over the past five years. When earnings per share decline, the maximum amount of dividends that can be paid also decreases.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Over the past two years, Yellow Pages has increased its dividend by around 17% per year on average.
Are the Yellow Pages an attractive dividend-paying stock, or rather left on the shelves? The Yellow Pages have comfortably low cash and earnings payout ratios, which can mean the dividend is sustainable even in the face of a sharp drop in earnings per share. Nonetheless, we consider declining profits to be a harbinger. All things considered, we’re not particularly excited about the Yellow Pages from a dividend perspective.
Although it is tempting to invest in the Yellow Pages purely for dividends, you should always be aware of the risks involved. Our analysis shows 2 warning signs for yellow pages and you must know them before you buy stocks.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming 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 the mentioned stocks.
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