Yellow Pages Limited (TSE:Y) Goes Ex-Dividend Soon

It looks like Yellow Pages Limited (TSE:Y) is about to go ex-dividend in the next 2 days. You can purchase shares before the 25th of February in order to receive the dividend, which the company will pay on the 15th of March.

Yellow Pages's upcoming dividend is CA$0.11 a share, following on from the last 12 months, when the company distributed a total of CA$0.44 per share to shareholders. Calculating the last year's worth of payments shows that Yellow Pages has a trailing yield of 3.6% on the current share price of CA$12.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Yellow Pages

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Yellow Pages has a low and conservative payout ratio of just 19% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 7.3% of its free cash flow last year.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Yellow Pages's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Given that Yellow Pages has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Has Yellow Pages got what it takes to maintain its dividend payments? Earnings per share have been flat, 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 gets cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Yellow Pages has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Yellow Pages and you should be aware of these before buying any 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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