Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BlackRock, Inc. (NYSE:BLK) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase BlackRock's shares on or after the 6th of December will not receive the dividend, which will be paid on the 22nd of December.
The company's upcoming dividend is US$5.00 a share, following on from the last 12 months, when the company distributed a total of US$20.00 per share to shareholders. Based on the last year's worth of payments, BlackRock stock has a trailing yield of around 2.7% on the current share price of $751.23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. BlackRock is paying out an acceptable 55% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see BlackRock earnings per share are up 3.5% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, BlackRock has lifted its dividend by approximately 12% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy BlackRock for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We think there are likely better opportunities out there.
If you're not too concerned about BlackRock's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 1 warning sign with BlackRock and understanding them should be part of your investment process.
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.