Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day 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. In other words, investors can purchase DENTSPLY SIRONA's shares before the 23rd of September in order to be eligible for the dividend, which will be paid on the 8th of October.
The company's next dividend payment will be US$0.11 per share. Last year, in total, the company distributed US$0.44 to shareholders. Last year's total dividend payments show that DENTSPLY SIRONA has a trailing yield of 0.7% on the current share price of $61.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether DENTSPLY SIRONA can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DENTSPLY SIRONA paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether DENTSPLY SIRONA generated enough free cash flow to afford its dividend. 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 encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that DENTSPLY SIRONA's earnings per share have remained effectively flat 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DENTSPLY SIRONA has delivered 8.2% dividend growth per year on average over the past 10 years.
To Sum It Up
Is DENTSPLY SIRONA worth buying for its dividend? Earnings per share have been flat, 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 gets cut. In summary, it's hard to get excited about DENTSPLY SIRONA from a dividend perspective.
On that note, you'll want to research what risks DENTSPLY SIRONA is facing. To help with this, we've discovered 1 warning sign for DENTSPLY SIRONA that you should be aware of before investing in their shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
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