Just Four Days Till Cactus, Inc. (NYSE:WHD) Will Be Trading Ex-Dividend

By
Simply Wall St
Published
February 20, 2022
NYSE:WHD
Source: Shutterstock

It looks like Cactus, Inc. (NYSE:WHD) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Cactus' shares on or after the 25th of February will not receive the dividend, which will be paid on the 17th of March.

The company's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Calculating the last year's worth of payments shows that Cactus has a trailing yield of 0.9% on the current share price of $47.78. If you buy this business for its dividend, you should have an idea of whether Cactus's dividend is reliable and sustainable. So we need to investigate whether Cactus can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Cactus

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Cactus is paying out an acceptable 51% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 32% of its free cash flow in the past 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.

historic-dividend
NYSE:WHD Historic Dividend February 20th 2022

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Cactus's earnings per share have plummeted approximately 72% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cactus has delivered 11% dividend growth per year on average over the past two years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Has Cactus got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

However if you're still interested in Cactus as a potential investment, you should definitely consider some of the risks involved with Cactus. In terms of investment risks, we've identified 1 warning sign with Cactus and understanding them should be part of your investment process.

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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