In This Article:
Barclays PLC (LON:BARC) stock is about to trade ex-dividend in two 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Barclays' shares before the 12th of August to receive the dividend, which will be paid on the 17th of September.
The company's upcoming dividend is UK£0.02 a share, following on from the last 12 months, when the company distributed a total of UK£0.04 per share to shareholders. Based on the last year's worth of payments, Barclays has a trailing yield of 2.2% on the current stock price of £1.8266. If you buy this business for its dividend, you should have an idea of whether Barclays's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Barclays
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Barclays paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Barclays has grown its earnings rapidly, up 32% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Barclays dividends are largely the same as they were 10 years ago.
The Bottom Line
Is Barclays worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Barclays looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.