PROG Holdings, Inc. (NYSE:PRG) Passed Our Checks, And It's About To Pay A US$0.12 Dividend

PROG Holdings, Inc. (NYSE:PRG) is about to trade ex-dividend in the next 4 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. 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. Accordingly, PROG Holdings investors that purchase the stock on or after the 19th of November will not receive the dividend, which will be paid on the 3rd of December.

The company's upcoming dividend is US$0.12 a share, following on from the last 12 months, when the company distributed a total of US$0.48 per share to shareholders. Looking at the last 12 months of distributions, PROG Holdings has a trailing yield of approximately 1.0% on its current stock price of US$48.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for PROG Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PROG Holdings is paying out just 9.9% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, PROG Holdings's earnings per share have been growing at 16% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. PROG Holdings has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is PROG Holdings an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating PROG Holdings more closely.

While it's tempting to invest in PROG Holdings for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for PROG Holdings (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.