Yahoo Finance Here's Why We're Wary Of Buying DENTSPLY SIRONA's (NASDAQ:XRAY) 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 DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase DENTSPLY SIRONA's shares before the 28th of June to receive the dividend, which will be paid on the 12th of July.
The company's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Calculating the last year's worth of payments shows that DENTSPLY SIRONA has a trailing yield of 2.5% on the current share price of US$25.45. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether DENTSPLY SIRONA has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for DENTSPLY SIRONA
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DENTSPLY SIRONA reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 42% of its free cash flow in the past year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. DENTSPLY SIRONA reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. DENTSPLY SIRONA has delivered an average of 9.9% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Remember, you can always get a snapshot of DENTSPLY SIRONA's financial health, by checking our visualisation of its financial health, here.
Final Takeaway
From a dividend perspective, should investors buy or avoid DENTSPLY SIRONA? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: DENTSPLY SIRONA has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
With that being said, if you're still considering DENTSPLY SIRONA as an investment, you'll find it beneficial to know what risks this stock is facing. Case in point: We've spotted 1 warning sign for DENTSPLY SIRONA you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
