Yahoo Finance Should You Buy Tempur Sealy International, Inc. (NYSE:TPX) For Its Upcoming Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tempur Sealy International, Inc. (NYSE:TPX) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day 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 two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Tempur Sealy International's shares before the 16th of November to receive the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Last year's total dividend payments show that Tempur Sealy International has a trailing yield of 1.3% on the current share price of $31.49. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Tempur Sealy International has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Tempur Sealy International
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tempur Sealy International has a low and conservative payout ratio of just 13% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 47% 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Tempur Sealy International has grown its earnings rapidly, up 29% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tempur Sealy International has delivered 20% dividend growth per year on average over the past two years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is Tempur Sealy International an attractive dividend stock, or better left on the shelf? We love that Tempur Sealy International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Tempur Sealy International, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we've spotted with Tempur Sealy International (including 1 which makes us a bit uncomfortable).
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
