There's A Lot To Like About WisdomTree's (NYSE:WT) Upcoming US$0.03 Dividend

WisdomTree, Inc. (NYSE:WT) stock is about to trade ex-dividend in 3 days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase WisdomTree's shares before the 7th of May in order to receive the dividend, which the company will pay on the 22nd of May.

The company's next dividend payment will be US$0.03 per share. Last year, in total, the company distributed US$0.12 to shareholders. Based on the last year's worth of payments, WisdomTree stock has a trailing yield of around 1.3% on the current share price of US$9.07. 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.

See our latest analysis for WisdomTree

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. WisdomTree is paying out just 17% 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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 WisdomTree has grown its earnings rapidly, up 25% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. WisdomTree has seen its dividend decline 9.3% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is WisdomTree an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. 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 WisdomTree more closely.

Curious what other investors think of WisdomTree? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.