Townsquare Media, Inc. (NYSE:TSQ) Pays A US$0.1975 Dividend In Just Two Days

Readers hoping to buy Townsquare Media, Inc. (NYSE:TSQ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Townsquare Media's shares before the 4th of April to receive the dividend, which will be paid on the 1st of May.

The company's next dividend payment will be US$0.1975 per share, on the back of last year when the company paid a total of US$0.75 to shareholders. Based on the last year's worth of payments, Townsquare Media stock has a trailing yield of around 7.2% on the current share price of US$10.98. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Townsquare Media

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Townsquare Media's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Townsquare Media didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 18% of its free cash flow in the last year.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Townsquare Media 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Townsquare Media has delivered an average of 18% per year annual increase in its dividend, based on the past six years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Remember, you can always get a snapshot of Townsquare Media's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Townsquare Media an attractive dividend stock, or better left on the shelf? It's hard to get used to Townsquare Media paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Townsquare Media's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Townsquare Media has 1 warning sign we think you should be aware of.

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.