Yahoo Finance Why You Might Be Interested In Franco-Nevada Corporation (TSE:FNV) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Franco-Nevada Corporation (TSE:FNV) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Accordingly, Franco-Nevada investors that purchase the stock on or after the 15th of March will not receive the dividend, which will be paid on the 30th of March.
The company's upcoming dividend is US$0.34 a share, following on from the last 12 months, when the company distributed a total of US$1.28 per share to shareholders. Calculating the last year's worth of payments shows that Franco-Nevada has a trailing yield of 1.0% on the current share price of CA$180.33. If you buy this business for its dividend, you should have an idea of whether Franco-Nevada's dividend is reliable and sustainable. As a result, readers should always check whether Franco-Nevada has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Franco-Nevada
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. That's why it's good to see Franco-Nevada paying out a modest 32% of its earnings. A useful secondary check can be to evaluate whether Franco-Nevada generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.
It's positive to see that Franco-Nevada'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. It's encouraging to see Franco-Nevada has grown its earnings rapidly, up 41% a year for the past five years. Franco-Nevada is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Franco-Nevada has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Should investors buy Franco-Nevada for the upcoming dividend? Franco-Nevada has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Franco-Nevada looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of Franco-Nevada? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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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