Yahoo Finance Is It Smart To Buy Virtu Financial, Inc. (NASDAQ:VIRT) Before It Goes Ex-Dividend?
Virtu Financial, Inc. (NASDAQ:VIRT) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Virtu Financial's shares on or after the 31st of May will not receive the dividend, which will be paid on the 15th of June.
The company's upcoming dividend is US$0.24 a share, following on from the last 12 months, when the company distributed a total of US$0.96 per share to shareholders. Based on the last year's worth of payments, Virtu Financial stock has a trailing yield of around 5.4% on the current share price of $17.64. If you buy this business for its dividend, you should have an idea of whether Virtu Financial's dividend is reliable and sustainable. So we need to investigate whether Virtu Financial can afford its dividend, and if the dividend could grow.
See our latest analysis for Virtu Financial
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. That's why it's good to see Virtu Financial paying out a modest 48% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Virtu Financial has grown its earnings rapidly, up 141% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Virtu Financial dividends are largely the same as they were eight years ago.
To Sum It Up
Is Virtu Financial an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Virtu Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you'll want to research what risks Virtu Financial is facing. Every company has risks, and we've spotted 2 warning signs for Virtu Financial you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
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