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Wabash National Corporation (NYSE:WNC) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 2nd of October will not receive the dividend, which will be paid on the 24th of October.
Wabash National's next dividend payment will be US$0.08 per share, and in the last 12 months, the company paid a total of US$0.3 per share. Based on the last year's worth of payments, Wabash National has a trailing yield of 2.2% on the current stock price of $14.56. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Wabash National
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. That's why it's good to see Wabash National paying out a modest 28% of its earnings. A useful secondary check can be to evaluate whether Wabash National generated enough free cash flow to afford its dividend. It paid out 18% 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 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Wabash National's earnings per share have been growing at 11% a year for the past 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wabash National has delivered 10% dividend growth per year on average over the past three years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.