Yahoo Finance Interested In Adeia's (NASDAQ:ADEA) Upcoming US$0.05 Dividend? You Have Four Days Left
Adeia Inc. (NASDAQ:ADEA) is about to trade ex-dividend in the next 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 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. In other words, investors can purchase Adeia's shares before the 26th of May in order to be eligible for the dividend, which will be paid on the 20th of June.
The company's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Last year's total dividend payments show that Adeia has a trailing yield of 2.2% on the current share price of $9.28. If you buy this business for its dividend, you should have an idea of whether Adeia's dividend is reliable and sustainable. As a result, readers should always check whether Adeia has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Adeia
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Adeia has a low and conservative payout ratio of just 19% of its income after tax. A useful secondary check can be to evaluate whether Adeia generated enough free cash flow to afford its dividend. It paid out 107% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.
Adeia paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Adeia to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Adeia has grown its earnings rapidly, up 36% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Adeia's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. Adeia is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Is Adeia an attractive dividend stock, or better left on the shelf? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's hard to get excited about Adeia from a dividend perspective.
On that note, you'll want to research what risks Adeia is facing. Be aware that Adeia is showing 5 warning signs in our investment analysis, and 2 of those make us uncomfortable...
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.
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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.
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