Thomson Reuters Corporation (TSE:TRI) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
It looks like Thomson Reuters Corporation (TSE:TRI) is about to go 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 important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Thomson Reuters investors that purchase the stock on or after the 18th of November will not receive the dividend, which will be paid on the 10th of December.
The company's next dividend payment will be US$0.655 per share, on the back of last year when the company paid a total of US$2.62 to shareholders. Last year's total dividend payments show that Thomson Reuters has a trailing yield of 2.4% on the current share price of CA$155.64. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Thomson Reuters is paying out an acceptable 70% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Thomson Reuters generated enough free cash flow to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Thomson Reuters'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 Thomson Reuters
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Thomson Reuters earnings per share are up 8.9% per annum over the last five years. Decent historical earnings per share growth suggests Thomson Reuters has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Thomson Reuters has lifted its dividend by approximately 5.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Thomson Reuters an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Thomson Reuters paid out a bit over half of its earnings and free cash flow last year. Overall, it's hard to get excited about Thomson Reuters from a dividend perspective.
However if you're still interested in Thomson Reuters as a potential investment, you should definitely consider some of the risks involved with Thomson Reuters. To help with this, we've discovered 1 warning sign for Thomson Reuters that you should be aware of before investing in their 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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