It looks like Dana Incorporated (NYSE:DAN) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. 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. Thus, you can purchase Dana’s shares before the 8th of August in order to receive the dividend, which the company will pay on the 29th of August.
The company’s upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Last year’s total dividend payments show that Dana has a trailing yield of 2.6% on the current share price of US$15.64. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s growing.
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. Dana paid a dividend last year despite being unprofitable. This might be a one-off event, but it’s not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Dana didn’t generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 45% of its free cash flow in the past year.
Check out our latest analysis for Dana
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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. Dana was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Dana has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.
We update our analysis on Dana every 24 hours, so you can always get the latest insights on its financial health, here.
Is Dana worth buying for its dividend? It’s hard to get used to Dana paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It’s not that we think Dana is a bad company, but these characteristics don’t generally lead to outstanding dividend performance.
So if you’re still interested in Dana despite it’s poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we’ve found 2 warning signs for Dana (1 is concerning!) that deserve your attention before investing in 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.