Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Definity Financial Corporation (TSE:DFY) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Definity Financial's shares before the 14th of June to receive the dividend, which will be paid on the 28th of June.
The company's next dividend payment will be CA$0.14 per share, on the back of last year when the company paid a total of CA$0.55 to shareholders. Looking at the last 12 months of distributions, Definity Financial has a trailing yield of approximately 1.5% on its current stock price of CA$36.08. If you buy this business for its dividend, you should have an idea of whether Definity Financial'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.
See our latest analysis for Definity Financial
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. Definity Financial is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why we're optimistic about Definity Financial's earnings, which have ripped higher, up 270% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.