Stock Analysis

Interested In eMedia Holdings' (JSE:EMH) Upcoming R00.16 Dividend? You Have Three Days Left

JSE:EMH
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It looks like eMedia Holdings Limited (JSE:EMH) is about to go ex-dividend in the next 3 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 eMedia Holdings' shares before the 12th of June to receive the dividend, which will be paid on the 18th of June.

The company's next dividend payment will be R00.16 per share, and in the last 12 months, the company paid a total of R0.32 per share. Looking at the last 12 months of distributions, eMedia Holdings has a trailing yield of approximately 9.6% on its current stock price of R03.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for eMedia Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. eMedia Holdings paid out 67% of its earnings to investors last year, a normal payout level for most businesses. 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. The company paid out 104% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While eMedia Holdings's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to eMedia Holdings's ability to maintain its dividend.

Click here to see how much of its profit eMedia Holdings paid out over the last 12 months.

historic-dividend
JSE:EMH Historic Dividend June 8th 2024

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see eMedia Holdings has grown its earnings rapidly, up 22% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. eMedia Holdings has delivered an average of 32% per year annual increase in its dividend, based on the past five years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is eMedia Holdings worth buying for its dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note eMedia Holdings paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into eMedia Holdings, it's worth knowing the risks this business faces. For example, we've found 2 warning signs for eMedia Holdings that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we're helping make it simple.

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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.