Don't Buy Wolverine World Wide, Inc. (NYSE:WWW) For Its Next Dividend Without Doing These Checks

By
Simply Wall St
Published
September 26, 2021
NYSE:WWW
Source: Shutterstock

It looks like Wolverine World Wide, Inc. (NYSE:WWW) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Wolverine World Wide's shares on or after the 30th of September will not receive the dividend, which will be paid on the 1st of November.

The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Calculating the last year's worth of payments shows that Wolverine World Wide has a trailing yield of 1.2% on the current share price of $32.44. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Wolverine World Wide has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Wolverine World Wide

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wolverine World Wide lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Wolverine World Wide didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 11% of its cash flow last year.

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

historic-dividend
NYSE:WWW Historic Dividend September 26th 2021

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Wolverine World Wide was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Wolverine World Wide has delivered an average of 6.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Get our latest analysis on Wolverine World Wide's balance sheet health here.

To Sum It Up

Has Wolverine World Wide got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Wolverine World Wide is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Wolverine World Wide despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for Wolverine World Wide that we recommend you consider before investing in the business.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.
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