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Readers hoping to buy TWC Enterprises Limited (TSE:TWC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Meaning, you will need to purchase TWC Enterprises' shares before the 30th of August to receive the dividend, which will be paid on the 16th of September.
The company's next dividend payment will be CA$0.075 per share, on the back of last year when the company paid a total of CA$0.30 to shareholders. Last year's total dividend payments show that TWC Enterprises has a trailing yield of 1.7% on the current share price of CA$17.75. If you buy this business for its dividend, you should have an idea of whether TWC Enterprises's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for TWC Enterprises
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. TWC Enterprises paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether TWC Enterprises generated enough free cash flow to afford its dividend. The good news is it paid out just 9.9% of its free cash flow in the 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 how much of its profit TWC Enterprises paid out over the last 12 months.
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. That's why it's comforting to see TWC Enterprises's earnings have been skyrocketing, up 25% per annum for the past five years. TWC Enterprises looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.