Just Four Days Till GATX Corporation (NYSE:GATX) Will Be Trading Ex-Dividend

By
Simply Wall St
Published
February 19, 2022
NYSE:GATX
Source: Shutterstock

GATX Corporation (NYSE:GATX) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase GATX's shares before the 24th of February to receive the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be US$0.52 per share, on the back of last year when the company paid a total of US$2.08 to shareholders. Last year's total dividend payments show that GATX has a trailing yield of 2.0% on the current share price of $105.64. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for GATX

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. GATX paid out a comfortable 49% of its profit last year. GATX paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

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

historic-dividend
NYSE:GATX Historic Dividend February 19th 2022

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. GATX's earnings per share have fallen at approximately 8.6% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, GATX has lifted its dividend by approximately 6.0% a year on average.

To Sum It Up

Is GATX worth buying for its dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think this is a pretty attractive combination, and would be interested in investigating GATX more closely.

So while GATX looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 3 warning signs for GATX that we strongly recommend you have a look at before investing in the company.

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

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