Johnson Controls International plc (NYSE:JCI) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Johnson Controls International plc (NYSE:JCI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. This means that investors who purchase Johnson Controls International's shares on or after the 25th of September will not receive the dividend, which will be paid on the 18th of October.

The company's next dividend payment will be US$0.37 per share. Last year, in total, the company distributed US$1.48 to shareholders. Last year's total dividend payments show that Johnson Controls International has a trailing yield of 2.0% on the current share price of US$74.23. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Johnson Controls International

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Johnson Controls International paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Johnson Controls International generated enough free cash flow to afford its dividend. Dividends consumed 69% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Johnson Controls International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. Fortunately for readers, Johnson Controls International's earnings per share have been growing at 14% a year for the past five years. Johnson Controls International is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Johnson Controls International has increased its dividend at approximately 5.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Should investors buy Johnson Controls International for the upcoming dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Johnson Controls International's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 62% and 69% respectively. To summarise, Johnson Controls International looks okay on this analysis, although it doesn't appear a stand-out opportunity.

In light of that, while Johnson Controls International has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 4 warning signs with Johnson Controls International (at least 1 which is a bit concerning), and understanding these should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.