Income Investors Should Know That Sinclair, Inc. (NASDAQ:SBGI) Goes Ex-Dividend Soon

Sinclair, Inc. (NASDAQ:SBGI) is about to trade ex-dividend in the next 4 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. 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. In other words, investors can purchase Sinclair's shares before the 30th of May in order to be eligible for the dividend, which will be paid on the 13th of June.

The company's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Based on the last year's worth of payments, Sinclair has a trailing yield of 7.1% on the current stock price of US$14.13. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Sinclair can afford its dividend, and if the dividend could grow.

We've discovered 3 warning signs about Sinclair. View them for free.

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. Sinclair paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out an unsustainably high 239% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Sinclair intends to continue funding this dividend, or if it could be forced to cut the payment.

While Sinclair's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Sinclair to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for Sinclair

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Sinclair's earnings have been skyrocketing, up 30% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Sinclair has lifted its dividend by approximately 4.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Sinclair is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Sinclair? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 239% of its cashflow, which is uncomfortably high. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Sinclair, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 3 warning signs for Sinclair (of which 1 is a bit unpleasant!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.