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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 Pulse Seismic Inc. (TSE:PSD) is about to go ex-dividend in just three 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. 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. Thus, you can purchase Pulse Seismic's shares before the 13th of May in order to receive the dividend, which the company will pay on the 24th of May.
The company's next dividend payment will be CA$0.013 per share. Last year, in total, the company distributed CA$0.05 to shareholders. Based on the last year's worth of payments, Pulse Seismic has a trailing yield of 2.2% on the current stock price of CA$2.26. If you buy this business for its dividend, you should have an idea of whether Pulse Seismic's dividend is reliable and sustainable. So we need to investigate whether Pulse Seismic can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Pulse Seismic
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. Pulse Seismic is paying out just 7.1% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.
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 Pulse Seismic paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Pulse Seismic's earnings per share have risen 10% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.