Just Four Days Till Thomson Reuters Corporation (TSE:TRI) Will Be Trading Ex-Dividend

It looks like Thomson Reuters Corporation (TSE:TRI) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Thomson Reuters' shares on or after the 18th of November will not receive the dividend, which will be paid on the 10th of December.

The company's next dividend payment will be US$0.595 per share, and in the last 12 months, the company paid a total of US$2.38 per share. Looking at the last 12 months of distributions, Thomson Reuters has a trailing yield of approximately 1.7% on its current stock price of CA$193.75. If you buy this business for its dividend, you should have an idea of whether Thomson Reuters's dividend is reliable and sustainable. As a result, readers should always check whether Thomson Reuters has been able to grow its dividends, or if the dividend might be cut.

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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. Thomson Reuters paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Thomson Reuters generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Thomson Reuters

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Thomson Reuters, with earnings per share up 4.0% on average 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Thomson Reuters has delivered an average of 4.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Thomson Reuters got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Thomson Reuters paid out a bit over half of its earnings and free cash flow last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Thomson Reuters today.

So if you want to do more digging on Thomson Reuters, you'll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we've identified 1 warning sign with Thomson Reuters and understanding them 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.