Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Zurn Elkay Water Solutions Corporation (NYSE:ZWS) is about to trade ex-dividend in the next 4 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. 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. Accordingly, Zurn Elkay Water Solutions investors that purchase the stock on or after the 17th of November will not receive the dividend, which will be paid on the 7th of December.
The company's next dividend payment will be US$0.08 per share, on the back of last year when the company paid a total of US$0.32 to shareholders. Looking at the last 12 months of distributions, Zurn Elkay Water Solutions has a trailing yield of approximately 1.1% on its current stock price of $28.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Zurn Elkay Water Solutions has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Zurn Elkay Water Solutions
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Zurn Elkay Water Solutions's payout ratio is modest, at just 49% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 19% of its free cash flow in the last year.
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 falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Zurn Elkay Water Solutions's earnings per share have fallen at approximately 17% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.