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Readers hoping to buy Pulse Seismic Inc. (TSE:PSD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Pulse Seismic's shares before the 14th of November in order to receive the dividend, which the company will pay on the 28th of November.
The company's next dividend payment will be CA$0.015 per share. Last year, in total, the company distributed CA$0.11 to shareholders. Calculating the last year's worth of payments shows that Pulse Seismic has a trailing yield of 4.8% on the current share price of CA$2.29. 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.
See our latest analysis for Pulse Seismic
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. That's why it's good to see Pulse Seismic paying out a modest 27% of its earnings. A useful secondary check can be to evaluate whether Pulse Seismic generated enough free cash flow to afford its dividend. Pulse Seismic paid out more free cash flow than it generated - 129%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Pulse Seismic paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Pulse Seismic's ability to maintain its dividend.
Click here to see how much of its profit Pulse Seismic paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Pulse Seismic has grown its earnings rapidly, up 38% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.