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Matson, Inc. (NYSE:MATX) is about to trade ex-dividend in the next 3 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. This means that investors who purchase Matson's shares on or after the 8th of May will not receive the dividend, which will be paid on the 5th of June.
The company's next dividend payment will be US$0.34 per share, and in the last 12 months, the company paid a total of US$1.36 per share. Based on the last year's worth of payments, Matson has a trailing yield of 1.2% on the current stock price of US$113.14. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Matson has a low and conservative payout ratio of just 9.3% of its income after tax. 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 9.8% of its cash flow last year.
It's positive to see that Matson'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 Matson
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Matson's earnings have been skyrocketing, up 50% per annum for the past five years. Matson looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.