Here's What We Like About Wheaton Precious Metals' (TSE:WPM) Upcoming Dividend




  • In Business
  • 2022-05-14 13:34:00Z
  • By Simply Wall St.
 

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wheaton Precious Metals Corp. (TSE:WPM) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Therefore, if you purchase Wheaton Precious Metals' shares on or after the 19th of May, you won't be eligible to receive the dividend, when it is paid on the 3rd of June.

The company's next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.60 to shareholders. Calculating the last year's worth of payments shows that Wheaton Precious Metals has a trailing yield of 1.5% on the current share price of CA$51.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Wheaton Precious Metals

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wheaton Precious Metals paid out a comfortable 35% of its profit last year. 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. It paid out more than half (54%) of its free cash flow in the past year, which is within an average range for most companies.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Wheaton Precious Metals's earnings have been skyrocketing, up 30% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Wheaton Precious Metals has delivered 17% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Wheaton Precious Metals got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Wheaton Precious Metals paid out less than half its earnings and a bit over half its free cash flow. Wheaton Precious Metals looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Wheaton Precious Metals has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Wheaton Precious Metals has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.

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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