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Be Sure To Check Out D.R. Horton, Inc. (NYSE:DHI) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that D.R. Horton, Inc. (NYSE:DHI) is about to go ex-dividend in just 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 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 D.R. Horton's shares on or after the 1st of December will not receive the dividend, which will be paid on the 12th of December.

The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Based on the last year's worth of payments, D.R. Horton has a trailing yield of 1.2% on the current stock price of $83.89. 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! As a result, readers should always check whether D.R. Horton has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for D.R. Horton

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. D.R. Horton has a low and conservative payout ratio of just 5.4% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 77% 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 D.R. Horton'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.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see D.R. Horton's earnings have been skyrocketing, up 44% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, D.R. Horton has increased its dividend at approximately 21% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy D.R. Horton for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, D.R. Horton paid out less than half its earnings and a bit over half its free cash flow. D.R. Horton looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks D.R. Horton is facing. Be aware that D.R. Horton is showing 3 warning signs in our investment analysis, and 2 of those make us uncomfortable...

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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