Yahoo Finance Dr. Martens plc (LON:DOCS) Pays A UK£0.043 Dividend In Just Two Days
It looks like Dr. Martens plc (LON:DOCS) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Accordingly, Dr. Martens investors that purchase the stock on or after the 8th of June will not receive the dividend, which will be paid on the 18th of July.
The company's upcoming dividend is UK£0.043 a share, following on from the last 12 months, when the company distributed a total of UK£0.058 per share to shareholders. Calculating the last year's worth of payments shows that Dr. Martens has a trailing yield of 4.2% on the current share price of £1.398. 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.
View our latest analysis for Dr. Martens
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Dr. Martens's payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Dr. Martens generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 225% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Dr. Martens intends to continue funding this dividend, or if it could be forced to cut the payment.
While Dr. Martens's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Dr. Martens's ability to maintain its dividend.
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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Dr. Martens has grown its earnings rapidly, up 38% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Unfortunately Dr. Martens has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Is Dr. Martens an attractive dividend stock, or better left on the shelf? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. All things considered, we are not particularly enthused about Dr. Martens from a dividend perspective.
In light of that, while Dr. Martens has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Dr. Martens (at least 1 which can't be ignored), and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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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