Yahoo Finance Only Three Days Left To Cash In On Peter Warren Automotive Holdings' (ASX:PWR) Dividend
Peter Warren Automotive Holdings Limited (ASX:PWR) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Peter Warren Automotive Holdings' shares before the 27th of February in order to receive the dividend, which the company will pay on the 27th of March.
The company's next dividend payment will be AU$0.085 per share, on the back of last year when the company paid a total of AU$0.17 to shareholders. Looking at the last 12 months of distributions, Peter Warren Automotive Holdings has a trailing yield of approximately 7.0% on its current stock price of AU$2.44. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Peter Warren Automotive Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Peter Warren Automotive Holdings paid out 70% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 49% of its free cash flow in the past year.
It's positive to see that Peter Warren Automotive Holdings'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Peter Warren Automotive Holdings earnings per share are up 3.3% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Peter Warren Automotive Holdings has seen its dividend decline 2.8% per annum on average over the past two years, which is not great to see. Peter Warren Automotive Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Has Peter Warren Automotive Holdings got what it takes to maintain its dividend payments? Earnings per share growth has been modest and Peter Warren Automotive Holdings paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, it's hard to get excited about Peter Warren Automotive Holdings from a dividend perspective.
While it's tempting to invest in Peter Warren Automotive Holdings for the dividends alone, you should always be mindful of the risks involved. We've identified 4 warning signs with Peter Warren Automotive Holdings (at least 2 which are a bit concerning), and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
