Readers hoping to buy Dine Brands Global, Inc. (NYSE:DIN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Dine Brands Global investors that purchase the stock on or after the 18th of March will not receive the dividend, which will be paid on the 1st of April.
The company's next dividend payment will be US$0.46 per share. Last year, in total, the company distributed US$1.84 to shareholders. Calculating the last year's worth of payments shows that Dine Brands Global has a trailing yield of 2.6% on the current share price of $71.86. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dine Brands Global paid out just 7.0% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Dine Brands Global's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Dine Brands Global has seen its dividend decline 5.3% per annum on average over the past nine years, which is not great to see.
The Bottom Line
Is Dine Brands Global worth buying for its dividend? Earnings per share have been flat in recent years, although Dine Brands Global reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Dine Brands Global appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
On that note, you'll want to research what risks Dine Brands Global is facing. For example, we've found 4 warning signs for Dine Brands Global (1 is a bit concerning!) 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.
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.