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Exponent, Inc. (NASDAQ:EXPO) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 11th of March, you won't be eligible to receive this dividend, when it is paid on the 26th of March.
Exponent's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Last year's total dividend payments show that Exponent has a trailing yield of 0.8% on the current share price of $94.81. 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.
Check out our latest analysis for Exponent
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Exponent paid out a comfortable 48% of its profit last year. 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. Fortunately, it paid out only 40% of its free cash flow in the past year.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Exponent's earnings per share have been growing at 14% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. 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. Since the start of our data, eight years ago, Exponent has lifted its dividend by approximately 23% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.