Interested In Pet Valu Holdings' (TSE:PET) Upcoming CA$0.12 Dividend? You Have Four Days Left

Readers hoping to buy Pet Valu Holdings Ltd. (TSE:PET) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Pet Valu Holdings' shares on or after the 30th of May will not receive the dividend, which will be paid on the 16th of June.

The company's next dividend payment will be CA$0.12 per share. Last year, in total, the company distributed CA$0.48 to shareholders. Last year's total dividend payments show that Pet Valu Holdings has a trailing yield of 1.6% on the current share price of CA$30.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've discovered 1 warning sign about Pet Valu Holdings. View them for free.

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 Pet Valu Holdings paying out a modest 35% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 24% of its free cash flow in the 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.

Check out our latest analysis for Pet Valu Holdings

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 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 not enthused to see that Pet Valu Holdings's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past four years, Pet Valu Holdings has increased its dividend at approximately 86% a year on average.

To Sum It Up

Has Pet Valu Holdings got what it takes to maintain its dividend payments? While it's not great to see that earnings per share are effectively flat over the four-year period we checked, at least the payout ratios are low and conservative. To summarise, Pet Valu Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Pet Valu Holdings for the dividends alone, you should always be mindful of the risks involved. For example - Pet Valu Holdings has 1 warning sign we think you should be aware of.

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