World Wrestling Entertainment, Inc. (NYSE:WWE) will pay a dividend of US$0.12 on the 27th of September. This makes the dividend yield 1.0%, which will augment investor returns quite nicely.
World Wrestling Entertainment's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, World Wrestling Entertainment's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 5.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 26%, which we are pretty comfortable with and we think is feasible on an earnings basis.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$1.44 in 2011, and the most recent fiscal year payment was US$0.48. This works out to a decline of approximately 67% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see World Wrestling Entertainment has been growing its earnings per share at 39% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
World Wrestling Entertainment Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think World Wrestling Entertainment might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for World Wrestling Entertainment that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
If you decide to trade World Wrestling Entertainment, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.