Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that FirstRand Limited (JSE:FSR) is about to go ex-dividend in just 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 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. This means that investors who purchase FirstRand's shares on or after the 29th of March will not receive the dividend, which will be paid on the 3rd of April.
The company's next dividend payment will be R1.89 per share, and in the last 12 months, the company paid a total of R3.78 per share. Looking at the last 12 months of distributions, FirstRand has a trailing yield of approximately 6.1% on its current stock price of ZAR62.26. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for FirstRand
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. FirstRand paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see FirstRand earnings per share are up 7.3% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. FirstRand has delivered 14% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.