Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The E.W. Scripps Company (NASDAQ:SSP) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 12th of September in order to be eligible for this dividend, which will be paid on the 25th of September.
E.W. Scripps's next dividend payment will be US$0.05 per share. Last year, in total, the company distributed US$0.20 to shareholders. Calculating the last year's worth of payments shows that E.W. Scripps has a trailing yield of 1.6% on the current share price of $12.81. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. E.W. Scripps paid out a comfortable 34% of its profit last year. A useful secondary check can be to evaluate whether E.W. Scripps generated enough free cash flow to afford its dividend. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that E.W. Scripps's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see E.W. Scripps's earnings have been skyrocketing, up 39% per annum for the past five years. E.W. Scripps is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. E.W. Scripps's dividend payments are effectively flat on where they were two years ago.
To Sum It Up
Is E.W. Scripps an attractive dividend stock, or better left on the shelf? We love that E.W. Scripps is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about E.W. Scripps, and we would prioritise taking a closer look at it.
Curious what other investors think of E.W. Scripps? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.