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Is It Smart To Buy Westgold Resources Limited (ASX:WGX) Before It Goes Ex-Dividend?

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Westgold Resources Limited (ASX:WGX) is about to trade ex-dividend in the next 2 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Westgold Resources' shares on or after the 30th of September, you won't be eligible to receive the dividend, when it is paid on the 15th of October.

The upcoming dividend for Westgold Resources is AU$0.02 per share. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Westgold Resources can afford its dividend, and if the dividend could grow.

See our latest analysis for Westgold Resources

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Westgold Resources is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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 Westgold Resources has grown its earnings rapidly, up 57% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Westgold Resources looks like a promising growth company.

This is Westgold Resources's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Is Westgold Resources worth buying for its dividend? 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 strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Westgold Resources looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Curious what other investors think of Westgold Resources? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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