In This Article:
It looks like Grange Resources Limited (ASX:GRR) is about to go ex-dividend in the next 4 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 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. In other words, investors can purchase Grange Resources' shares before the 12th of March in order to be eligible for the dividend, which will be paid on the 28th of March.
The company's next dividend payment will be AU$0.02 per share, on the back of last year when the company paid a total of AU$0.02 to shareholders. Calculating the last year's worth of payments shows that Grange Resources has a trailing yield of 4.4% on the current share price of AU$0.455. 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.
View our latest analysis for Grange Resources
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Grange Resources paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 14% of its free cash flow in the last year.
It's positive to see that Grange Resources'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 how much of its profit Grange Resources paid out over the last 12 months.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Grange Resources earnings per share are up 5.8% per annum 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.