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

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sinclair, Inc. (NASDAQ:SBGI) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Meaning, you will need to purchase Sinclair's shares before the 29th of August to receive the dividend, which will be paid on the 15th of September.

The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Calculating the last year's worth of payments shows that Sinclair has a trailing yield of 7.0% on the current share price of US$14.36. If you buy this business for its dividend, you should have an idea of whether Sinclair's dividend is reliable and sustainable. As a result, readers should always check whether Sinclair has been able to grow its dividends, or if the dividend might be cut.

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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. Sinclair distributed an unsustainably high 135% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Sinclair fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Sinclair, with earnings per share up 7.0% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Sinclair has increased its dividend at approximately 4.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Sinclair worth buying for its dividend? Earnings per share have grown modestly, and last year Sinclair paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. To summarise, Sinclair looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Sinclair, you should know about the other risks facing this business. For instance, we've identified 3 warning signs for Sinclair (1 doesn't sit too well with us) you should be aware of.

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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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.