Yahoo Finance Sirius XM Holdings Inc. (NASDAQ:SIRI) Passed Our Checks, And It's About To Pay A US$0.024 Dividend
Sirius XM Holdings Inc. (NASDAQ:SIRI) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Sirius XM Holdings investors that purchase the stock on or after the 4th of May will not receive the dividend, which will be paid on the 24th of May.
The company's next dividend payment will be US$0.024 per share. Last year, in total, the company distributed US$0.097 to shareholders. Looking at the last 12 months of distributions, Sirius XM Holdings has a trailing yield of approximately 2.5% on its current stock price of $3.8. 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 investigate whether Sirius XM Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Sirius XM 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. That's why it's good to see Sirius XM Holdings paying out a modest 32% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Sirius XM 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. For this reason, we're glad to see Sirius XM Holdings's earnings per share have risen 16% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, Sirius XM Holdings has lifted its dividend by approximately 16% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Sirius XM Holdings worth buying for its dividend? Sirius XM Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Sirius XM Holdings, and we would prioritise taking a closer look at it.
While it's tempting to invest in Sirius XM Holdings for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for Sirius XM Holdings (1 is concerning) you should be aware of.
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.
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