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Simpson Manufacturing Co., Inc. (NYSE:SSD) is about to trade ex-dividend in the next four 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. 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. Accordingly, Simpson Manufacturing investors that purchase the stock on or after the 5th of April will not receive the dividend, which will be paid on the 27th of April.
The company's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Calculating the last year's worth of payments shows that Simpson Manufacturing has a trailing yield of 1.0% on the current share price of $105.54. If you buy this business for its dividend, you should have an idea of whether Simpson Manufacturing's dividend is reliable and sustainable. As a result, readers should always check whether Simpson Manufacturing has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Simpson Manufacturing
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. Simpson Manufacturing is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Simpson Manufacturing's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 Simpson Manufacturing's earnings have been skyrocketing, up 32% per annum for the past five years. Simpson Manufacturing earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'