Income Investors Should Know That Teleflex Incorporated (NYSE:TFX) Goes Ex-Dividend Soon
It looks like Teleflex Incorporated (NYSE:TFX) is about to go ex-dividend in the next 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Teleflex's shares before the 16th of November to receive the dividend, which will be paid on the 31st of December.
The company's next dividend payment will be US$0.34 per share. Last year, in total, the company distributed US$1.36 to shareholders. Looking at the last 12 months of distributions, Teleflex has a trailing yield of approximately 0.9% on its current stock price of US$155.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Teleflex has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Teleflex paid out 67% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
It's positive to see that Teleflex'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.
Check out our latest analysis for Teleflex
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Teleflex's earnings per share have fallen at approximately 21% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Teleflex's dividend payments are effectively flat on where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.
To Sum It Up
Should investors buy Teleflex for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
So if you want to do more digging on Teleflex, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 1 warning sign for Teleflex that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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