Foley Wines Limited (NZSE:FWL) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Foley Wines investors that purchase the stock on or after the 6th of October will not receive the dividend, which will be paid on the 21st of October.
The company's next dividend payment will be NZ$0.047 per share, which looks like a nice increase on last year, when the company distributed a total of NZ$0.04 to shareholders. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Foley Wines
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. Foley Wines paid out a comfortable 42% of its profit last year. A useful secondary check can be to evaluate whether Foley Wines generated enough free cash flow to afford its dividend. Foley Wines paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
Click here to see how much of its profit Foley Wines paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Foley Wines's earnings per share have risen 10% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Foley Wines has lifted its dividend by approximately 10% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Should investors buy Foley Wines for the upcoming dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
In light of that, while Foley Wines has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Foley Wines has 1 warning sign we think 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.
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