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It looks like Loblaw Companies Limited (TSE:L) is about to go 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. Therefore, if you purchase Loblaw Companies' shares on or after the 13th of December, you won't be eligible to receive the dividend, when it is paid on the 30th of December.
The company's next dividend payment will be CA$0.513 per share, and in the last 12 months, the company paid a total of CA$2.05 per share. Based on the last year's worth of payments, Loblaw Companies stock has a trailing yield of around 1.1% on the current share price of CA$191.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Loblaw Companies has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Loblaw Companies
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Loblaw Companies's payout ratio is modest, at just 26% of profit. 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. Luckily it paid out just 18% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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. It's encouraging to see Loblaw Companies has grown its earnings rapidly, up 31% a year for the past five years. Loblaw Companies is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.