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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is about to trade 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Cognizant Technology Solutions' shares before the 20th of November in order to receive the dividend, which the company will pay on the 30th of November.
The company's upcoming dividend is US$0.29 a share, following on from the last 12 months, when the company distributed a total of US$1.16 per share to shareholders. Last year's total dividend payments show that Cognizant Technology Solutions has a trailing yield of 1.7% on the current share price of $67.38. 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! As a result, readers should always check whether Cognizant Technology Solutions has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Cognizant Technology Solutions
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cognizant Technology Solutions paid out a comfortable 28% of its profit last year. 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 30% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Cognizant Technology Solutions'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?
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Cognizant Technology Solutions's earnings per share have been growing at 10% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.