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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 FirstCash, Inc. (NASDAQ:FCFS) is about to go ex-dividend in just 3 days. If you purchase the stock on or after the 13th of February, you won't be eligible to receive this dividend, when it is paid on the 28th of February.
FirstCash's next dividend payment will be US$0.27 per share, and in the last 12 months, the company paid a total of US$1.08 per share. Based on the last year's worth of payments, FirstCash has a trailing yield of 1.3% on the current stock price of $84.95. 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 FirstCash has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for FirstCash
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. FirstCash paid out a comfortable 27% of its profit last year.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see FirstCash earnings per share are up 5.1% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. FirstCash has delivered 21% dividend growth per year on average over the past four years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid FirstCash? FirstCash has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. FirstCash ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.