Yahoo Finance Interested In WD-40's (NASDAQ:WDFC) Upcoming US$0.67 Dividend? You Have Four Days Left
WD-40 Company (NASDAQ:WDFC) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 16th of July will not receive the dividend, which will be paid on the 31st of July.
WD-40's next dividend payment will be US$0.67 per share. Last year, in total, the company distributed US$2.68 to shareholders. Based on the last year's worth of payments, WD-40 has a trailing yield of 1.4% on the current stock price of $194.06. If you buy this business for its dividend, you should have an idea of whether WD-40's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for WD-40
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. WD-40 paid out 68% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year, it paid out more than three-quarters (78%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at WD-40, with earnings per share up 4.5% on average over the last five years. A high payout ratio of 68% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, WD-40 could be signalling that its future growth prospects are thin.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, WD-40 has lifted its dividend by approximately 10% 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.
Final Takeaway
Is WD-40 worth buying for its dividend? Earnings per share have been growing modestly and WD-40 paid out a bit over half of its earnings and free cash flow last year. To summarise, WD-40 looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So if you want to do more digging on WD-40, you'll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we've identified 1 warning sign with WD-40 and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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