Be Sure To Check Out Spectrum Brands Holdings, Inc. (NYSE:SPB) Before It Goes Ex-Dividend

Readers hoping to buy Spectrum Brands Holdings, Inc. (NYSE:SPB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 22nd of February in order to be eligible for this dividend, which will be paid on the 16th of March.

Spectrum Brands Holdings's next dividend payment will be US$0.42 per share, and in the last 12 months, the company paid a total of US$1.68 per share. Last year's total dividend payments show that Spectrum Brands Holdings has a trailing yield of 2.0% on the current share price of $84.44. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Spectrum Brands Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Spectrum Brands Holdings

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. Spectrum Brands Holdings paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Spectrum Brands Holdings generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

It's positive to see that Spectrum Brands Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Spectrum Brands Holdings's earnings per share have been growing at 15% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Spectrum Brands Holdings's dividend payments per share have declined at 46% per year on average over the past three years, which is uninspiring. 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.

Final Takeaway

Is Spectrum Brands Holdings an attractive dividend stock, or better left on the shelf? It's great that Spectrum Brands Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Spectrum Brands Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Spectrum Brands Holdings is facing. For example, we've found 3 warning signs for Spectrum Brands Holdings (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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