Yahoo Finance Peter Warren Automotive Holdings Limited (ASX:PWR) Goes Ex-Dividend Soon
Peter Warren Automotive Holdings Limited (ASX:PWR) stock is about to trade ex-dividend in 4 days. 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 Peter Warren Automotive Holdings' shares before the 4th of September in order to be eligible for the dividend, which will be paid on the 3rd of October.
The company's next dividend payment will be AU$0.11 per share. Last year, in total, the company distributed AU$0.22 to shareholders. Based on the last year's worth of payments, Peter Warren Automotive Holdings has a trailing yield of 8.5% on the current stock price of A$2.59. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Peter Warren Automotive Holdings
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. Peter Warren Automotive Holdings paid out more than half (67%) of its earnings last year, which is a regular payout ratio for most companies. 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. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 6.9% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Given that Peter Warren Automotive Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Peter Warren Automotive Holdings worth buying for its dividend? Earnings per share have been growing modestly and Peter Warren Automotive Holdings paid out a bit over half of its earnings and free cash flow last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Peter Warren Automotive Holdings's dividend merits.
However if you're still interested in Peter Warren Automotive Holdings as a potential investment, you should definitely consider some of the risks involved with Peter Warren Automotive Holdings. We've identified 3 warning signs with Peter Warren Automotive Holdings (at least 1 which is significant), and understanding these should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
