Readers hoping to buy Patrick Industries, Inc. (NASDAQ:PATK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. In other words, investors can purchase Patrick Industries' shares before the 24th of November in order to be eligible for the dividend, which will be paid on the 11th of December.
The company's next dividend payment will be US$0.55 per share, and in the last 12 months, the company paid a total of US$1.80 per share. Last year's total dividend payments show that Patrick Industries has a trailing yield of 2.1% on the current share price of $84.93. If you buy this business for its dividend, you should have an idea of whether Patrick Industries's dividend is reliable and sustainable. So we need to investigate whether Patrick Industries can afford its dividend, and if the dividend could grow.
View our latest analysis for Patrick Industries
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Patrick Industries paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether Patrick Industries generated enough free cash flow to afford its dividend. Luckily it paid out just 9.8% of its free cash flow last year.
It's positive to see that Patrick Industries'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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Patrick Industries's earnings per share have been growing at 14% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last four years, Patrick Industries has lifted its dividend by approximately 16% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Patrick Industries an attractive dividend stock, or better left on the shelf? We love that Patrick Industries is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 4 warning signs for Patrick Industries and you should be aware of these before buying any 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.