In This Article:
ARC Resources Ltd. (TSE:ARX) stock is about to trade ex-dividend in 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. In other words, investors can purchase ARC Resources' shares before the 28th of September in order to be eligible for the dividend, which will be paid on the 16th of October.
The company's next dividend payment will be CA$0.17 per share, on the back of last year when the company paid a total of CA$0.68 to shareholders. Looking at the last 12 months of distributions, ARC Resources has a trailing yield of approximately 3.3% on its current stock price of CA$20.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for ARC Resources
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ARC Resources has a low and conservative payout ratio of just 15% of its income after tax. A useful secondary check can be to evaluate whether ARC Resources generated enough free cash flow to afford its dividend. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that ARC Resources'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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see ARC Resources's earnings have been skyrocketing, up 30% per annum for the past five years. ARC Resources 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.'