There's A Lot To Like About Ryanair Holdings' (ISE:RYA) Upcoming €0.223 Dividend

Ryanair Holdings plc (ISE:RYA) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day 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. 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. Therefore, if you purchase Ryanair Holdings' shares on or after the 16th of January, you won't be eligible to receive the dividend, when it is paid on the 26th of February.

The company's next dividend payment will be €0.223 per share, on the back of last year when the company paid a total of €0.36 to shareholders. Calculating the last year's worth of payments shows that Ryanair Holdings has a trailing yield of 2.4% on the current share price of €18.775. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Ryanair Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Ryanair Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ryanair Holdings paid out a comfortable 43% of its profit last year. 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. Fortunately, it paid out only 38% of its free cash flow in the past 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Ryanair Holdings's earnings per share have risen 13% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

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

To Sum It Up

Is Ryanair Holdings an attractive dividend stock, or better left on the shelf? We love that Ryanair Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Ryanair Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Ryanair Holdings and you should be aware of it before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.