Freightways Group Limited (NZSE:FRW) Stock Goes Ex-Dividend In Just Four Days

Freightways Group Limited (NZSE:FRW) is about to trade ex-dividend in the next four days. 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. 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 Freightways Group's shares on or after the 6th of March will not receive the dividend, which will be paid on the 1st of April.

The company's next dividend payment will be NZ$0.2235294 per share, and in the last 12 months, the company paid a total of NZ$0.37 per share. Based on the last year's worth of payments, Freightways Group has a trailing yield of 3.3% on the current stock price of NZ$11.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Freightways Group

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. Last year Freightways Group paid out 91% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Freightways Group's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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 Freightways Group'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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Freightways Group has lifted its dividend by approximately 5.1% a year on average.

Final Takeaway

Should investors buy Freightways Group for the upcoming dividend? Earnings per share have been flat and, while Freightways Group paid out just 48% of its cashflow, it paid out an uncomfortably high percentage of its profit. To summarise, Freightways Group looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Freightways Group, you should know about the other risks facing this business. For example, we've found 2 warning signs for Freightways Group that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.