Why You Might Be Interested In Grindrod Limited (JSE:GND) For Its Upcoming Dividend
Readers hoping to buy Grindrod Limited (JSE:GND) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Grindrod's shares before the 9th of September in order to receive the dividend, which the company will pay on the 14th of September.
The company's upcoming dividend is R00.243 a share, following on from the last 12 months, when the company distributed a total of R0.48 per share to shareholders. Based on the last year's worth of payments, Grindrod has a trailing yield of 1.9% on the current stock price of R025.13. 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! We need to see whether the dividend is covered by earnings and if it's growing.
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. Fortunately Grindrod's payout ratio is modest, at just 28% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Grindrod's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for Grindrod
Click here to see how much of its profit Grindrod paid out over the last 12 months.
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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Grindrod has grown its earnings rapidly, up 36% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Grindrod has lifted its dividend by approximately 9.4% 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.
The Bottom Line
Is Grindrod an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Grindrod paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Grindrod, and we would prioritise taking a closer look at it.
Keen to explore more data on Grindrod's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.