Yahoo Finance WSP Global Inc. (TSE:WSP) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy WSP Global Inc. (TSE:WSP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 30th of March will not receive the dividend, which will be paid on the 15th of April.
WSP Global's next dividend payment will be CA$0.38 per share. Last year, in total, the company distributed CA$1.50 to shareholders. Calculating the last year's worth of payments shows that WSP Global has a trailing yield of 2.0% on the current share price of CA$76.39. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether WSP Global has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for WSP Global
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. WSP Global is paying out an acceptable 55% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 WSP Global has grown its earnings rapidly, up 23% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, WSP Global could have strong prospects for future increases to the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. WSP Global's dividend payments per share have declined at 2.6% per year on average over the past ten years, which is uninspiring. 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.
The Bottom Line
Has WSP Global got what it takes to maintain its dividend payments? WSP Global's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for WSP Global and you should be aware of them before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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