Four Days Left Until PGG Wrightson Limited (NZSE:PGW) Trades Ex-Dividend
PGG Wrightson Limited (NZSE:PGW) stock is about to trade ex-dividend in four days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. This means that investors who purchase PGG Wrightson's shares on or after the 10th of September will not receive the dividend, which will be paid on the 6th of October.
The company's upcoming dividend is NZ$0.0647058 a share, following on from the last 12 months, when the company distributed a total of NZ$0.11 per share to shareholders. Looking at the last 12 months of distributions, PGG Wrightson has a trailing yield of approximately 4.8% on its current stock price of NZ$2.27. If you buy this business for its dividend, you should have an idea of whether PGG Wrightson's dividend is reliable and sustainable. As a result, readers should always check whether PGG Wrightson has been able to grow its dividends, or if the dividend might be cut.
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. Fortunately PGG Wrightson's payout ratio is modest, at just 48% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.
It's positive to see that PGG Wrightson'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.
See our latest analysis for PGG Wrightson
Click here to see how much of its profit PGG Wrightson paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. PGG Wrightson's earnings per share have fallen at approximately 7.3% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PGG Wrightson's dividend payments per share have declined at 11% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
The Bottom Line
Is PGG Wrightson worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for PGG Wrightson (1 is concerning!) that you ought to be aware of before buying the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.