Interested In Yellow Pages' (TSE:Y) Upcoming CA$0.25 Dividend? You Have Three Days Left

Readers hoping to buy Yellow Pages Limited (TSE:Y) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Yellow Pages' shares before the 27th of May in order to be eligible for the dividend, which will be paid on the 16th of June.

The company's upcoming dividend is CA$0.25 a share, following on from the last 12 months, when the company distributed a total of CA$1.00 per share to shareholders. Looking at the last 12 months of distributions, Yellow Pages has a trailing yield of approximately 8.7% on its current stock price of CA$11.46. If you buy this business for its dividend, you should have an idea of whether Yellow Pages's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

We've discovered 1 warning sign about Yellow Pages. View them for free.

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. Fortunately Yellow Pages's payout ratio is modest, at just 47% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's positive to see that Yellow Pages'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.

View our latest analysis for Yellow Pages

Click here to see how much of its profit Yellow Pages paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. 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 discomforted by Yellow Pages's 15% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Yellow Pages has delivered an average of 18% per year annual increase in its dividend, based on the past five years of dividend payments.

To Sum It Up

Is Yellow Pages worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Yellow Pages is facing. Our analysis shows 1 warning sign for Yellow Pages and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.