There's A Lot To Like About Ethan Allen Interiors' (NYSE:ETD) Upcoming US$0.79 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ethan Allen Interiors Inc. (NYSE:ETD) is about to go ex-dividend in just 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Ethan Allen Interiors' shares before the 13th of August in order to receive the dividend, which the company will pay on the 29th of August.

The company's next dividend payment will be US$0.79 per share, and in the last 12 months, the company paid a total of US$1.96 per share. Based on the last year's worth of payments, Ethan Allen Interiors stock has a trailing yield of around 6.5% on the current share price of US$30.03. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Ethan Allen Interiors

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. Ethan Allen Interiors paid out 59% of its earnings to investors last year, a normal payout level for most businesses.

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 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 Ethan Allen Interiors has grown its earnings rapidly, up 21% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ethan Allen Interiors has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Ethan Allen Interiors for the upcoming dividend? Earnings per share are growing at an attractive rate, and Ethan Allen Interiors is paying out a bit over half its profits. Overall, Ethan Allen Interiors looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Ethan Allen Interiors has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Ethan Allen Interiors (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

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.

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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.