It looks like FirstCash, Inc. (NASDAQ:FCFS) is about to go ex-dividend in the next 4 days. You can purchase shares before the 14th of August in order to receive the dividend, which the company will pay on the 30th of August.
FirstCash’s next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Based on the last year’s worth of payments, FirstCash has a trailing yield of 1.0% on the current stock price of $100.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
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. That’s why it’s good to see FirstCash paying out a modest 27% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see FirstCash earnings per share are up 4.4% per annum over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past 4 years, FirstCash has increased its dividend at approximately 19% a year on average. 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.
The Bottom Line
Should investors buy FirstCash for the upcoming dividend? FirstCash has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, FirstCash appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Curious what other investors think of FirstCash? See what analysts 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.
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