Income Investors Should Know That Bristol-Myers Squibb Company (NYSE:BMY) Goes Ex-Dividend Soon

Bristol-Myers Squibb Company (NYSE:BMY) is about to trade ex-dividend in the next two days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Thus, you can purchase Bristol-Myers Squibb's shares before the 4th of October in order to receive the dividend, which the company will pay on the 1st of November.

The company's next dividend payment will be US$0.60 per share, and in the last 12 months, the company paid a total of US$2.40 per share. Last year's total dividend payments show that Bristol-Myers Squibb has a trailing yield of 4.6% on the current share price of US$51.74. If you buy this business for its dividend, you should have an idea of whether Bristol-Myers Squibb's dividend is reliable and sustainable. As a result, readers should always check whether Bristol-Myers Squibb has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Bristol-Myers Squibb

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bristol-Myers Squibb paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. 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. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

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. Bristol-Myers Squibb 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. In the past 10 years, Bristol-Myers Squibb has increased its dividend at approximately 5.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Remember, you can always get a snapshot of Bristol-Myers Squibb's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Bristol-Myers Squibb an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Bristol-Myers Squibb, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 2 warning signs for Bristol-Myers Squibb 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.