Yahoo Finance Why You Might Be Interested In Bristol-Myers Squibb Company (NYSE:BMY) For Its Upcoming Dividend
Bristol-Myers Squibb Company (NYSE:BMY) is about to trade ex-dividend in the next four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Bristol-Myers Squibb's shares on or after the 5th of October will not receive the dividend, which will be paid on the 1st of November.
The company's next dividend payment will be US$0.57 per share, and in the last 12 months, the company paid a total of US$2.28 per share. Last year's total dividend payments show that Bristol-Myers Squibb has a trailing yield of 3.9% on the current share price of $58.04. 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 Bristol-Myers Squibb
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bristol-Myers Squibb paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. 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 45% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Bristol-Myers Squibb's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 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 Bristol-Myers Squibb's earnings have been skyrocketing, up 44% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bristol-Myers Squibb has delivered 5.0% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Bristol-Myers Squibb is keeping back more of its profits to grow the business.
Final Takeaway
Has Bristol-Myers Squibb got what it takes to maintain its dividend payments? We like Bristol-Myers Squibb's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Bristol-Myers Squibb looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Bristol-Myers Squibb looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Bristol-Myers Squibb that you should be aware of before investing in their shares.
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.
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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.
