Element Fleet Management Corp. (TSE:EFN) is about to trade ex-dividend in the next four 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 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. In other words, investors can purchase Element Fleet Management's shares before the 29th of June in order to be eligible for the dividend, which will be paid on the 15th of July.
The company's next dividend payment will be CA$0.065 per share, on the back of last year when the company paid a total of CA$0.26 to shareholders. Last year's total dividend payments show that Element Fleet Management has a trailing yield of 1.8% on the current share price of CA$14.53. If you buy this business for its dividend, you should have an idea of whether Element Fleet Management's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Element Fleet Management paying out a modest 36% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Element Fleet Management has grown its earnings rapidly, up 41% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, six years ago, Element Fleet Management has lifted its dividend by approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Element Fleet Management worth buying for its dividend? Companies like Element Fleet Management that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Element Fleet Management looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Element Fleet Management for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Element Fleet Management that you should be aware of before investing in their shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. 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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