Evertz Technologies Limited (TSE:ET) stock is about to trade ex-dividend in 2 days time. Ex-dividend means that investors that purchase the stock on or after the 12th of September will not receive this dividend, which will be paid on the 20th of September.
The upcoming dividend for Evertz Technologies will put a total of CA$1.08 per share in shareholders’ pockets, up from last year’s total dividends of CA$0.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Evertz Technologies has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Evertz Technologies paid out more than half (75%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Evertz Technologies generated enough free cash flow to afford its dividend. The company paid out 90% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect – but we’d generally want look more closely here.
Evertz Technologies paid out less in dividends than it reported in profits, but unfortunately it didn’t generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Evertz Technologies’s ability to maintain its dividend.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re encouraged by the steady growth at Evertz Technologies, with earnings per share up 2.5% on average over the last five years. Earnings have been growing somewhat, but we’re concerned dividend payments consumed most of the company’s cash flow over the past year.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Evertz Technologies has delivered 8.4% dividend growth per year on average over the past ten years. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Evertz Technologies got what it takes to maintain its dividend payments? Evertz Technologies is paying out a reasonable percentage of its income and an uncomfortably high 90% of its cash flow as dividends. At least earnings per share have been growing steadily. Overall it doesn’t look like the most suitable dividend stock for a long-term buy and hold investor.
Ever wonder what the future holds for Evertz Technologies? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.