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Gen Digital Inc. (NASDAQ:GEN) is about to trade ex-dividend in the next four 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. 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. Thus, you can purchase Gen Digital's shares before the 18th of August in order to receive the dividend, which the company will pay on the 13th of September.
The company's next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.50 to shareholders. Looking at the last 12 months of distributions, Gen Digital has a trailing yield of approximately 2.4% on its current stock price of $20.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Gen Digital has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Gen Digital
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. Gen Digital has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether Gen Digital generated enough free cash flow to afford its dividend. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 Gen Digital earnings per share are up 6.0% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.