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Tyson Foods, Inc. (NYSE:TSN) stock is about to trade ex-dividend in 3 days. 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. 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. Thus, you can purchase Tyson Foods' shares before the 31st of May in order to receive the dividend, which the company will pay on the 15th of June.
The company's upcoming dividend is US$0.46 a share, following on from the last 12 months, when the company distributed a total of US$1.84 per share to shareholders. Last year's total dividend payments show that Tyson Foods has a trailing yield of 2.0% on the current share price of $89.76. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Tyson Foods
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tyson Foods has a low and conservative payout ratio of just 16% of its income after tax. A useful secondary check can be to evaluate whether Tyson Foods generated enough free cash flow to afford its dividend. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Tyson Foods's earnings per share have risen 20% per annum over the last 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.