Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy Wolverine World Wide, Inc. (NYSE:WWW) For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Wolverine World Wide, Inc. (NYSE:WWW) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Wolverine World Wide's shares on or after the 31st of December, you won't be eligible to receive the dividend, when it is paid on the 1st of February.
The company's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Last year's total dividend payments show that Wolverine World Wide has a trailing yield of 1.4% on the current share price of $28.81. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Wolverine World Wide
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Wolverine World Wide reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Wolverine World Wide didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 19% of its free cash flow in the last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Wolverine World Wide was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wolverine World Wide has delivered 5.2% dividend growth per year on average over the past 10 years.
Get our latest analysis on Wolverine World Wide's balance sheet health here.
Final Takeaway
Has Wolverine World Wide got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Wolverine World Wide has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Wolverine World Wide. For example, Wolverine World Wide has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
