Interested In Delek US Holdings' (NYSE:DK) Upcoming US$0.255 Dividend? You Have Four Days Left

Delek US Holdings, Inc. (NYSE:DK) stock is about to trade ex-dividend in 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. 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. Accordingly, Delek US Holdings investors that purchase the stock on or after the 12th of November will not receive the dividend, which will be paid on the 18th of November.

The company's upcoming dividend is US$0.255 a share, following on from the last 12 months, when the company distributed a total of US$1.02 per share to shareholders. Looking at the last 12 months of distributions, Delek US Holdings has a trailing yield of approximately 5.9% on its current stock price of US$17.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Delek US Holdings

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. Delek US Holdings 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. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Delek US Holdings 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. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Delek US Holdings was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Delek US Holdings's dividend payments are effectively flat on where they were 10 years ago.

Remember, you can always get a snapshot of Delek US Holdings's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Delek US Holdings? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you're not too concerned about Delek US Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, Delek US Holdings has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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.