Yahoo Finance Should You Buy Wayside Technology Group, Inc. (NASDAQ:WSTG) For Its Upcoming Dividend?
Readers hoping to buy Wayside Technology Group, Inc. (NASDAQ:WSTG) 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 one business day 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 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. Accordingly, Wayside Technology Group investors that purchase the stock on or after the 13th of May will not receive the dividend, which will be paid on the 20th of May.
The company's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.68 to shareholders. Looking at the last 12 months of distributions, Wayside Technology Group has a trailing yield of approximately 2.0% on its current stock price of $34.06. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Wayside Technology Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Wayside Technology Group paying out a modest 29% of its earnings. 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. It paid out more than half (55%) of its free cash flow in the past year, which is within an average 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 how much of its profit Wayside Technology Group 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. Fortunately for readers, Wayside Technology Group's earnings per share have been growing at 13% a year for the past five years. Wayside Technology Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wayside Technology Group has delivered an average of 0.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Wayside Technology Group is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy Wayside Technology Group for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Wayside Technology Group paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.
So while Wayside Technology Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Wayside Technology Group (of which 1 makes us a bit uncomfortable!) you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
