Only Four Days Left To Cash In On Johnson Controls International's (NYSE:JCI) Dividend

It looks like Johnson Controls International plc (NYSE:JCI) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day 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. 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. Thus, you can purchase Johnson Controls International's shares before the 24th of June in order to receive the dividend, which the company will pay on the 19th of July.

The company's next dividend payment will be US$0.37 per share, and in the last 12 months, the company paid a total of US$1.48 per share. Based on the last year's worth of payments, Johnson Controls International stock has a trailing yield of around 2.1% on the current share price of US$69.10. If you buy this business for its dividend, you should have an idea of whether Johnson Controls International's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out 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 is paying out an acceptable 59% of its profit, a common payout level among most companies. 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. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 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 15% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Johnson Controls International has delivered 6.9% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

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. However, we'd also note that Johnson Controls International is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Johnson Controls International for the dividends alone, you should always be mindful of the risks involved. For example, Johnson Controls International has 3 warning signs (and 1 which is concerning) we think you should know about.

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

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.

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