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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wynn Resorts, Limited (NASDAQ:WYNN) is about to trade ex-dividend in the next 4 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 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 Wynn Resorts' shares before the 17th of May to receive the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Looking at the last 12 months of distributions, Wynn Resorts has a trailing yield of approximately 1.0% on its current stock price of US$96.39. If you buy this business for its dividend, you should have an idea of whether Wynn Resorts's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Wynn Resorts
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Wynn Resorts has a low and conservative payout ratio of just 13% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Wynn Resorts, with earnings per share up 7.6% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.