Here's What We Like About WESCO International's (NYSE:WCC) Upcoming Dividend

It looks like WESCO International, Inc. (NYSE:WCC) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase WESCO International's shares before the 12th of September in order to be eligible for the dividend, which will be paid on the 30th of September.

The company's upcoming dividend is US$0.45375 a share, following on from the last 12 months, when the company distributed a total of US$1.82 per share to shareholders. Looking at the last 12 months of distributions, WESCO International has a trailing yield of approximately 0.8% on its current stock price of US$219.18. If you buy this business for its dividend, you should have an idea of whether WESCO International's dividend is reliable and sustainable. So we need to investigate whether WESCO International can afford its dividend, and if the dividend could grow.

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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. WESCO International is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether WESCO International generated enough free cash flow to afford its dividend. The good news is it paid out just 23% of its free cash flow in the last year.

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.

See our latest analysis for WESCO International

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see WESCO International has grown its earnings rapidly, up 20% a year for the past five years. WESCO International earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. WESCO International has delivered 6.6% dividend growth per year on average over the past three 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.

The Bottom Line

Is WESCO International an attractive dividend stock, or better left on the shelf? We love that WESCO International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about WESCO International, and we would prioritise taking a closer look at it.

So while WESCO International looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for WESCO International (of which 1 is a bit concerning!) you should know about.

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.