Quad/Graphics, Inc. (NYSE:QUAD) Pays A US$0.05 Dividend In Just Three Days

Readers hoping to buy Quad/Graphics, Inc. (NYSE:QUAD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Meaning, you will need to purchase Quad/Graphics' shares before the 19th of August to receive the dividend, which will be paid on the 6th of September.

The company's next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.20 to shareholders. Based on the last year's worth of payments, Quad/Graphics stock has a trailing yield of around 4.5% on the current share price of US$4.47. 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 investigate whether Quad/Graphics can afford its dividend, and if the dividend could grow.

View our latest analysis for Quad/Graphics

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. Quad/Graphics reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

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. Quad/Graphics was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Quad/Graphics has seen its dividend decline 16% per annum on average over the past 10 years, which is not great to see.

Get our latest analysis on Quad/Graphics's balance sheet health here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Quad/Graphics? It's hard to get used to Quad/Graphics paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall, it's hard to get excited about Quad/Graphics from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Quad/Graphics, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for Quad/Graphics that you should be aware of before investing in their shares.

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.