Why You Might Be Interested In Entravision Communications Corporation (NYSE:EVC) For Its Upcoming Dividend

Entravision Communications Corporation (NYSE:EVC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Entravision Communications' shares before the 15th of March to receive the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.10 per share. Calculating the last year's worth of payments shows that Entravision Communications has a trailing yield of 3.1% on the current share price of $6.39. 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! As a result, readers should always check whether Entravision Communications has been able to grow its dividends, or if the dividend might be cut.

See 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. Fortunately Entravision Communications's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether Entravision Communications generated enough free cash flow to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.

It's positive to see that Entravision Communications's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Entravision Communications, with earnings per share up 4.0% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Entravision Communications has delivered 5.2% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Entravision Communications? Earnings per share have been growing moderately, and Entravision Communications is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Entravision Communications is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Entravision Communications is facing. In terms of investment risks, we've identified 2 warning signs with Entravision Communications and understanding them should be part of your investment process.

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.