Two Days Left To Buy Bristol-Myers Squibb Company (NYSE:BMY) Before The Ex-Dividend Date

Bristol-Myers Squibb Company (NYSE:BMY) stock is about to trade ex-dividend in two 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 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 Bristol-Myers Squibb's shares before the 3rd of July to receive the dividend, which will be paid on the 1st of August.

The company's next dividend payment will be US$0.62 per share, and in the last 12 months, the company paid a total of US$2.48 per share. Based on the last year's worth of payments, Bristol-Myers Squibb has a trailing yield of 5.4% on the current stock price of US$46.35. If you buy this business for its dividend, you should have an idea of whether Bristol-Myers Squibb's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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 out 91% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.

It's good to see that while Bristol-Myers Squibb's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

View our latest analysis for Bristol-Myers Squibb

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Bristol-Myers Squibb, with earnings per share up 5.7% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Bristol-Myers Squibb has lifted its dividend by approximately 5.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Bristol-Myers Squibb an attractive dividend stock, or better left on the shelf? Earnings per share have grown modestly, and last year Bristol-Myers Squibb paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Bristol-Myers Squibb, you should know about the other risks facing this business. Every company has risks, and we've spotted 3 warning signs for Bristol-Myers Squibb you should know about.

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.