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Readers hoping to buy Global Payments Inc. (NYSE:GPN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Global Payments' shares before the 13th of December in order to receive the dividend, which the company will pay on the 27th of December.
The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Looking at the last 12 months of distributions, Global Payments has a trailing yield of approximately 0.8% on its current stock price of US$117.83. If you buy this business for its dividend, you should have an idea of whether Global Payments's dividend is reliable and sustainable. As a result, readers should always check whether Global Payments has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Global Payments
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Global Payments is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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?
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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Global Payments's earnings per share have been growing at 13% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Global Payments has lifted its dividend by approximately 38% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.