Fox Corporation (NASDAQ:FOXA) Will Pay A US$0.24 Dividend In Four Days

By
Simply Wall St
Published
February 24, 2022
NasdaqGS:FOXA
Source: Shutterstock

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Fox Corporation (NASDAQ:FOXA) is about to go ex-dividend in just four 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. Therefore, if you purchase Fox's shares on or after the 1st of March, you won't be eligible to receive the dividend, when it is paid on the 30th of March.

The company's next dividend payment will be US$0.24 per share, and in the last 12 months, the company paid a total of US$0.48 per share. Based on the last year's worth of payments, Fox stock has a trailing yield of around 1.2% on the current share price of $40.97. If you buy this business for its dividend, you should have an idea of whether Fox's dividend is reliable and sustainable. As a result, readers should always check whether Fox has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Fox

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. Fox has a low and conservative payout ratio of just 19% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 22% of its free cash flow in the 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.

historic-dividend
NasdaqGS:FOXA Historic Dividend February 24th 2022

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Fox's earnings per share have dropped 10% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last three years, Fox has lifted its dividend by approximately 1.4% a year on average.

To Sum It Up

Is Fox an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

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

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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