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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 Joyce Corporation Ltd (ASX:JYC) is about to go ex-dividend in just two days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Joyce investors that purchase the stock on or after the 12th of September will not receive the dividend, which will be paid on the 4th of October.
The company's next dividend payment will be AU$0.175 per share, and in the last 12 months, the company paid a total of AU$0.23 per share. Last year's total dividend payments show that Joyce has a trailing yield of 5.5% on the current share price of AU$4.19. If you buy this business for its dividend, you should have an idea of whether Joyce's dividend is reliable and sustainable. So we need to investigate whether Joyce can afford its dividend, and if the dividend could grow.
View our latest analysis for Joyce
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. Joyce is paying out an acceptable 74% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Joyce generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.
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 Joyce 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 Joyce's earnings have been skyrocketing, up 21% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.