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Readers hoping to buy Endeavour Mining plc (TSE:EDV) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Endeavour Mining's shares on or after the 14th of March will not receive the dividend, which will be paid on the 15th of April.
The company's upcoming dividend is US$0.57 a share, following on from the last 12 months, when the company distributed a total of US$1.14 per share to shareholders. Last year's total dividend payments show that Endeavour Mining has a trailing yield of 5.3% on the current share price of CA$30.79. If you buy this business for its dividend, you should have an idea of whether Endeavour Mining's dividend is reliable and sustainable. 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 Endeavour Mining
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Endeavour Mining's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the last year, it paid out more than three-quarters (78%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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. Endeavour Mining was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.