Yahoo Finance Should You Buy Glencore plc (LON:GLEN) For Its Upcoming Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Glencore plc (LON:GLEN) is about to go ex-dividend in just four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Glencore's shares before the 4th of May in order to be eligible for the dividend, which will be paid on the 1st of June.
The company's upcoming dividend is US$0.22 a share, following on from the last 12 months, when the company distributed a total of US$0.44 per share to shareholders. Calculating the last year's worth of payments shows that Glencore has a trailing yield of 7.5% on the current share price of £4.69. If you buy this business for its dividend, you should have an idea of whether Glencore's dividend is reliable and sustainable. So we need to investigate whether Glencore can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Glencore
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. Fortunately Glencore's payout ratio is modest, at just 33% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 51% of its free cash flow as dividends, within the usual 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. 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 Glencore's earnings have been skyrocketing, up 28% per annum 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. In the past 10 years, Glencore has increased its dividend at approximately 11% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has Glencore 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, Glencore paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Glencore for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Glencore (1 is potentially serious!) that deserve your attention before investing in the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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