Yahoo Finance DXC Technology Company (NYSE:DXC) Passed Our Checks, And It's About To Pay A 0.6% Dividend
DXC Technology Company (NYSE:DXC) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 3rd of September in order to be eligible for this dividend, which will be paid on the 15th of October.
DXC Technology's next dividend payment will be US$0.21 per share. Last year, in total, the company distributed US$0.84 to shareholders. Based on the last year's worth of payments, DXC Technology has a trailing yield of 2.5% on the current stock price of $32.96. If you buy this business for its dividend, you should have an idea of whether DXC Technology's dividend is reliable and sustainable. As a result, readers should always check whether DXC Technology has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for DXC Technology
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DXC Technology is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It distributed 28% of its free cash flow as dividends, a comfortable payout level 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?
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see DXC Technology earnings per share are up 4.7% per annum over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DXC Technology has delivered 3.8% dividend growth per year on average over the past 9 years. 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
Has DXC Technology got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and DXC Technology is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but DXC Technology is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about DXC Technology, and we would prioritise taking a closer look at it.
Ever wonder what the future holds for DXC Technology? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.