Yahoo Finance Should You Buy WESCO International, Inc. (NYSE:WCC) For Its Upcoming Dividend?
WESCO International, Inc. (NYSE:WCC) stock is about to trade ex-dividend in 4 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase WESCO International's shares on or after the 14th of June, you won't be eligible to receive the dividend, when it is paid on the 28th of June.
The company's next dividend payment will be US$0.4125 per share, on the back of last year when the company paid a total of US$1.65 to shareholders. Based on the last year's worth of payments, WESCO International stock has a trailing yield of around 0.9% on the current share price of US$176.38. 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 investigate whether WESCO International can afford its dividend, and if the dividend could grow.
Check out our latest analysis for WESCO International
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. WESCO International paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 9.7% of its free cash flow in the last year.
It's positive to see that WESCO International'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.
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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see WESCO International has grown its earnings rapidly, up 20% a year for the past five years. WESCO International looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Unfortunately WESCO International has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
From a dividend perspective, should investors buy or avoid WESCO International? WESCO International has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks WESCO International is facing. For example, we've found 2 warning signs for WESCO International that we recommend you consider before investing in the business.
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.
