Yahoo Finance Focusrite plc (LON:TUNE) Will Pay A UK£0.021 Dividend In Three Days
Readers hoping to buy Focusrite plc (LON:TUNE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Focusrite's shares before the 9th of May in order to be eligible for the dividend, which will be paid on the 10th of June.
The company's next dividend payment will be UK£0.021 per share, and in the last 12 months, the company paid a total of UK£0.066 per share. Last year's total dividend payments show that Focusrite has a trailing yield of 1.8% on the current share price of UK£3.65. 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 investigate whether Focusrite can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Focusrite
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Focusrite paying out a modest 33% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Focusrite paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Focusrite's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, Focusrite has lifted its dividend by approximately 21% a year on average.
To Sum It Up
Is Focusrite worth buying for its dividend? Earnings per share have barely grown in this time, and although Focusrite is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. It's not common to see a company paying out a limited amount of its profits yet a substantially higher percentage of its cash flow, so we'd flag this as a concern. Overall, it's hard to get excited about Focusrite from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Focusrite, you should know about the other risks facing this business. In terms of investment risks, we've identified 2 warning signs with Focusrite and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
