Entravision Communications Corporation (NYSE:EVC) Pays A US$0.05 Dividend In Just Three Days

It looks like Entravision Communications Corporation (NYSE:EVC) is about to go ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Entravision Communications' shares before the 16th of December in order to be eligible for the dividend, which will be paid on the 31st of December.

The company's next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.20 to shareholders. Calculating the last year's worth of payments shows that Entravision Communications has a trailing yield of 7.8% on the current share price of US$2.56. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Entravision Communications

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. Entravision Communications reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit Entravision Communications paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Entravision Communications was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Entravision Communications's dividend payments are effectively flat on where they were 10 years ago.

Get our latest analysis on Entravision Communications's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Entravision Communications? It's hard to get used to Entravision Communications paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. To summarise, Entravision Communications looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Entravision Communications for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Entravision Communications (of which 1 is significant!) you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.