Yahoo Finance Income Investors Should Know That Thomson Reuters Corporation (TSE:TRI) Goes Ex-Dividend Soon
Readers hoping to buy Thomson Reuters Corporation (TSE:TRI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. This means that investors who purchase Thomson Reuters' shares on or after the 16th of November will not receive the dividend, which will be paid on the 15th of December.
The company's upcoming dividend is US$0.45 a share, following on from the last 12 months, when the company distributed a total of US$1.78 per share to shareholders. Based on the last year's worth of payments, Thomson Reuters has a trailing yield of 1.6% on the current stock price of CA$147. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Thomson Reuters
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. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Thomson Reuters generated enough free cash flow to afford its dividend. It paid out 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's positive to see that Thomson Reuters'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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Thomson Reuters, with earnings per share up 7.8% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Thomson Reuters has lifted its dividend by approximately 2.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Thomson Reuters an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Thomson Reuters paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Thomson Reuters from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Thomson Reuters, you should know about the other risks facing this business. For example, we've found 2 warning signs for Thomson Reuters that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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