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Cheniere Energy, Inc. (NYSE:LNG) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Cheniere Energy's shares before the 7th of February in order to receive the dividend, which the company will pay on the 21st of February.
The company's next dividend payment will be US$0.50 per share, and in the last 12 months, the company paid a total of US$2.00 per share. Based on the last year's worth of payments, Cheniere Energy stock has a trailing yield of around 0.9% on the current share price of US$223.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Cheniere Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cheniere Energy has a low and conservative payout ratio of just 11% of its income after tax. A useful secondary check can be to evaluate whether Cheniere Energy generated enough free cash flow to afford its dividend. Luckily it paid out just 13% of its free cash flow last year.
It's positive to see that Cheniere Energy's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Cheniere Energy has grown its earnings rapidly, up 53% a year for the past five years. Cheniere Energy looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Cheniere Energy has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.