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It looks like Golden Ocean Group Limited (NASDAQ:GOGL) is about to go ex-dividend in the next 4 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. 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 Golden Ocean Group's shares before the 11th of September to receive the dividend, which will be paid on the 20th of September.
The company's next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$0.60 to shareholders. Looking at the last 12 months of distributions, Golden Ocean Group has a trailing yield of approximately 5.2% on its current stock price of US$11.57. 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 Golden Ocean Group has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Golden Ocean Group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year Golden Ocean Group paid out 93% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether Golden Ocean Group generated enough free cash flow to afford its dividend. The company paid out 92% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
Cash is slightly more important than profit from a dividend perspective, but given Golden Ocean Group's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Golden Ocean Group's earnings per share have been growing at 13% a year for the past five years. It's not encouraging to see Golden Ocean Group paying out basically all of its earnings and cashflow to shareholders. We're glad that earnings are growing rapidly, but we're wary of the company stretching itself financially.