In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Energizer Holdings, Inc. (NYSE:ENR) is about to trade ex-dividend in the next four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Energizer Holdings' shares before the 27th of November in order to be eligible for the dividend, which will be paid on the 12th of December.
The company's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Last year's total dividend payments show that Energizer Holdings has a trailing yield of 3.2% on the current share price of US$38.09. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Energizer Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Energizer Holdings paid out a disturbingly high 226% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business. 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. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Energizer Holdings fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Energizer Holdings's earnings per share have fallen at approximately 7.8% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.