Energizer Holdings, Inc. (NYSE:ENR) 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Energizer Holdings' shares before the 17th of February to receive the dividend, which will be paid on the 16th of March.
The company's next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Calculating the last year's worth of payments shows that Energizer Holdings has a trailing yield of 3.4% on the current share price of $35.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Energizer Holdings 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. Energizer Holdings paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Dividends consumed 65% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Energizer Holdings reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Energizer Holdings has delivered 2.3% dividend growth per year on average over the past eight years.
The Bottom Line
Is Energizer Holdings worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Energizer Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that in mind though, if the poor dividend characteristics of Energizer Holdings don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Energizer Holdings is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
If you're in the market for strong dividend payers, we recommend checking our selection of top 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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