Be Sure To Check Out Tower Limited (NZSE:TWR) Before It Goes Ex-Dividend

Tower Limited (NZSE:TWR) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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 Tower's shares on or after the 15th of January will not receive the dividend, which will be paid on the 30th of January.

The company's next dividend payment will be NZ$0.065 per share. Last year, in total, the company distributed NZ$0.13 to shareholders. Calculating the last year's worth of payments shows that Tower has a trailing yield of 9.5% on the current share price of NZ$1.365. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Tower

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. Tower is paying out an acceptable 51% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Tower has grown its earnings rapidly, up 32% 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. It looks like the Tower dividends are largely the same as they were 10 years ago.

To Sum It Up

Has Tower got what it takes to maintain its dividend payments? Earnings per share are growing nicely, and Tower is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, Tower looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Tower has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Tower 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.