Advertisement
Australia markets closed
  • ALL ORDS

    8,206.10
    +72.70 (+0.89%)
     
  • ASX 200

    7,959.30
    +69.70 (+0.88%)
     
  • AUD/USD

    0.6786
    +0.0024 (+0.35%)
     
  • OIL

    82.18
    -0.44 (-0.53%)
     
  • GOLD

    2,416.00
    -5.90 (-0.24%)
     
  • Bitcoin AUD

    88,702.63
    +2,334.68 (+2.70%)
     
  • CMC Crypto 200

    1,252.51
    +53.94 (+4.50%)
     
  • AUD/EUR

    0.6218
    +0.0001 (+0.02%)
     
  • AUD/NZD

    1.1082
    -0.0002 (-0.02%)
     
  • NZX 50

    12,134.97
    +76.68 (+0.64%)
     
  • NASDAQ

    20,331.49
    +120.13 (+0.59%)
     
  • FTSE

    8,252.91
    +29.57 (+0.36%)
     
  • Dow Jones

    40,000.90
    +247.15 (+0.62%)
     
  • DAX

    18,748.18
    +213.62 (+1.15%)
     
  • Hang Seng

    18,293.38
    +461.05 (+2.59%)
     
  • NIKKEI 225

    41,190.68
    -1,033.34 (-2.45%)
     

Why You Might Be Interested In Tower Limited (NZSE:TWR) For Its Upcoming Dividend

Tower Limited (NZSE:TWR) stock is about to trade ex-dividend in 4 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. 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. This means that investors who purchase Tower's shares on or after the 12th of June will not receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be NZ$0.03 per share, on the back of last year when the company paid a total of NZ$0.06 to shareholders. Calculating the last year's worth of payments shows that Tower has a trailing yield of 7.4% on the current share price of NZ$0.81. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Tower

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Tower paying out a modest 33% of its earnings.

ADVERTISEMENT

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Tower's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tower's dividend payments per share have declined at 5.9% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Should investors buy Tower for the upcoming dividend? Tower has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Tower more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Tower you should know about.

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.