Yahoo Finance Be Sure To Check Out Designer Brands Inc. (NYSE:DBI) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Designer Brands Inc. (NYSE:DBI) is about to go ex-dividend in just 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Therefore, if you purchase Designer Brands' shares on or after the 27th of March, you won't be eligible to receive the dividend, when it is paid on the 12th of April.
The company's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.20 per share to shareholders. Based on the last year's worth of payments, Designer Brands has a trailing yield of 1.8% on the current stock price of US$11.22. If you buy this business for its dividend, you should have an idea of whether Designer Brands's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Designer Brands
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Designer Brands is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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. It's encouraging to see Designer Brands has grown its earnings rapidly, up 35% a year for the past five years. Designer Brands looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Designer Brands's dividend payments per share have declined at 18% per year on average over the past 10 years, which is uninspiring. Designer Brands is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
Final Takeaway
Is Designer Brands an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Designer Brands looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Designer Brands has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Designer Brands (of which 1 makes us a bit uncomfortable!) you should know about.
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.
