Is It Smart To Buy Expedia Group, Inc. (NASDAQ:EXPE) Before It Goes Ex-Dividend?
Expedia Group, Inc. (NASDAQ:EXPE) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Expedia Group's shares on or after the 18th of November will not receive the dividend, which will be paid on the 10th of December.
The company's next dividend payment will be US$0.48 per share. Last year, in total, the company distributed US$1.92 to shareholders. Based on the last year's worth of payments, Expedia Group has a trailing yield of 0.7% on the current stock price of US$261.05. 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! As a result, readers should always check whether Expedia Group has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Expedia Group is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Expedia Group generated enough free cash flow to afford its dividend. The good news is it paid out just 5.9% of its free cash flow in the last year.
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.
See our latest analysis for Expedia Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. That's why it's comforting to see Expedia Group's earnings have been skyrocketing, up 49% per annum for the past five years. Expedia Group earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Expedia Group has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Expedia Group? Expedia Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Expedia Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Expedia Group for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Expedia Group that you should be aware of before investing in their shares.
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.
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