Only Four Days Left To Cash In On Emerald Holding's (NYSE:EEX) Dividend

Emerald Holding, Inc. (NYSE:EEX) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Emerald Holding's shares on or after the 10th of November, you won't be eligible to receive the dividend, when it is paid on the 20th of November.

The company's next dividend payment will be US$0.015 per share. Last year, in total, the company distributed US$0.06 to shareholders. Calculating the last year's worth of payments shows that Emerald Holding has a trailing yield of 1.5% on the current share price of US$4.09. If you buy this business for its dividend, you should have an idea of whether Emerald Holding's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. An unusually high payout ratio of 261% of its profit suggests something is happening other than the usual distribution of profits to shareholders. 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. Fortunately, it paid out only 28% of its free cash flow in the past year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Emerald Holding fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

View our latest analysis for Emerald Holding

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. It's encouraging to see Emerald Holding has grown its earnings rapidly, up 76% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Emerald Holding has seen its dividend decline 18% per annum on average over the past eight years, which is not great to see. Emerald Holding is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Should investors buy Emerald Holding for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Emerald Holding is paying out so much of its profit. All things considered, we are not particularly enthused about Emerald Holding from a dividend perspective.

So while Emerald Holding looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Emerald Holding is showing 2 warning signs in our investment analysis, and 1 of those is significant...

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.