Yahoo Finance Two Days Left Until Freehold Royalties Ltd. (TSE:FRU) Trades Ex-Dividend
Readers hoping to buy Freehold Royalties Ltd. (TSE:FRU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Freehold Royalties' shares before the 29th of April to receive the dividend, which will be paid on the 15th of May.
The company's next dividend payment will be CA$0.09 per share, and in the last 12 months, the company paid a total of CA$1.08 per share. Looking at the last 12 months of distributions, Freehold Royalties has a trailing yield of approximately 7.6% on its current stock price of CA$14.28. If you buy this business for its dividend, you should have an idea of whether Freehold Royalties's dividend is reliable and sustainable. So we need to investigate whether Freehold Royalties can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Freehold Royalties
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Freehold Royalties distributed an unsustainably high 123% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether Freehold Royalties generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (79%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's good to see that while Freehold Royalties's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Freehold Royalties's earnings have been skyrocketing, up 49% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Freehold Royalties has seen its dividend decline 4.3% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Final Takeaway
Is Freehold Royalties an attractive dividend stock, or better left on the shelf? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. To summarise, Freehold Royalties looks okay on this analysis, although it doesn't appear a stand-out opportunity.
If you're not too concerned about Freehold Royalties's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 1 warning sign for Freehold Royalties that you should be aware of before investing in their shares.
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.
