There's A Lot To Like About Weatherford International's (NASDAQ:WFRD) Upcoming US$0.25 Dividend

Readers hoping to buy Weatherford International plc (NASDAQ:WFRD) 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 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, Weatherford International investors that purchase the stock on or after the 6th of November will not receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be US$0.25 per share. If you buy this business for its dividend, you should have an idea of whether Weatherford International's dividend is reliable and sustainable. So we need to investigate whether Weatherford International can afford its dividend, and if the dividend could grow.

View our latest analysis for Weatherford International

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Weatherford International has a low and conservative payout ratio of just 3.4% of its income after tax. A useful secondary check can be to evaluate whether Weatherford International generated enough free cash flow to afford its dividend. Luckily it paid out just 2.8% of its free cash flow 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.

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 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 Weatherford International's earnings have been skyrocketing, up 31% per annum for the past five years. Weatherford International 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.'

This is Weatherford International's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

The Bottom Line

Should investors buy Weatherford International for the upcoming dividend? We love that Weatherford International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Weatherford International, and we would prioritise taking a closer look at it.

In light of that, while Weatherford International has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for Weatherford International you should be aware of.

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.

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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.