Whirlpool Corporation (NYSE:WHR) Passed Our Checks, And It's About To Pay A US$1.40 Dividend

By
Simply Wall St
Published
August 21, 2021
NYSE:WHR
Source: Shutterstock

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 Whirlpool Corporation (NYSE:WHR) is about to go ex-dividend in just three 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. Meaning, you will need to purchase Whirlpool's shares before the 26th of August to receive the dividend, which will be paid on the 15th of September.

The company's next dividend payment will be US$1.40 per share. Last year, in total, the company distributed US$5.60 to shareholders. Looking at the last 12 months of distributions, Whirlpool has a trailing yield of approximately 2.5% on its current stock price of $221.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Whirlpool

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Whirlpool has a low and conservative payout ratio of just 17% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 13% 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:WHR Historic Dividend August 22nd 2021

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Whirlpool's earnings have been skyrocketing, up 25% per annum for the past five years. Whirlpool 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.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Whirlpool has delivered 13% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Whirlpool? Whirlpool has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Whirlpool looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Whirlpool looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Whirlpool is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored...

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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