Yahoo Finance Iridium Communications Inc. (NASDAQ:IRDM) Stock Goes Ex-Dividend In Just Four Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Iridium Communications Inc. (NASDAQ:IRDM) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Iridium Communications investors that purchase the stock on or after the 14th of June will not receive the dividend, which will be paid on the 28th of June.
The company's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.52 to shareholders. Based on the last year's worth of payments, Iridium Communications has a trailing yield of 1.9% on the current stock price of US$27.99. If you buy this business for its dividend, you should have an idea of whether Iridium Communications's dividend is reliable and sustainable. As a result, readers should always check whether Iridium Communications has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Iridium Communications
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. Iridium Communications paid out a disturbingly high 256% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.
It's good to see that while Iridium Communications's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
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. It's encouraging to see Iridium Communications has grown its earnings rapidly, up 59% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Iridium Communications dividends are largely the same as they were two years ago.
The Bottom Line
From a dividend perspective, should investors buy or avoid Iridium Communications? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Iridium Communications's paying out such a high percentage of its profit. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Iridium Communications is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
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.
