Yahoo Finance Don't Buy Whirlpool Corporation (NYSE:WHR) For Its Next Dividend Without Doing These Checks
Whirlpool Corporation (NYSE:WHR) stock is about to trade ex-dividend in 4 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. Thus, you can purchase Whirlpool's shares before the 18th of May in order to receive the dividend, which the company will pay on the 15th of June.
The company's next dividend payment will be US$1.75 per share, on the back of last year when the company paid a total of US$7.00 to shareholders. Based on the last year's worth of payments, Whirlpool stock has a trailing yield of around 5.4% on the current share price of $130.59. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 Whirlpool
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Whirlpool paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Whirlpool didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range for most companies.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Whirlpool reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Whirlpool has increased its dividend at approximately 13% a year on average.
Get our latest analysis on Whirlpool's balance sheet health here.
Final Takeaway
From a dividend perspective, should investors buy or avoid Whirlpool? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
With that being said, if you're still considering Whirlpool as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 3 warning signs for Whirlpool that we strongly recommend you have a look at before investing in the company.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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.
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