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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Patrick Industries, Inc. (NASDAQ:PATK) is about to go ex-dividend in just 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. Therefore, if you purchase Patrick Industries' shares on or after the 24th of November, you won't be eligible to receive the dividend, when it is paid on the 11th of December.
The company's upcoming dividend is US$0.55 a share, following on from the last 12 months, when the company distributed a total of US$1.80 per share to shareholders. Calculating the last year's worth of payments shows that Patrick Industries has a trailing yield of 2.1% on the current share price of $84.93. If you buy this business for its dividend, you should have an idea of whether Patrick Industries's dividend is reliable and sustainable. So we need to investigate whether Patrick Industries can afford its dividend, and if the dividend could grow.
See our latest analysis for Patrick Industries
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Patrick Industries's payout ratio is modest, at just 26% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 9.8% of its free cash flow in the last year.
It's positive to see that Patrick Industries'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.
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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Patrick Industries's earnings per share have risen 14% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.