Ultra Electronics Holdings plc (LON:ULE) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 27th of August in order to be eligible for this dividend, which will be paid on the 18th of September.
Ultra Electronics Holdings's upcoming dividend is UK£0.55 a share, following on from the last 12 months, when the company distributed a total of UK£0.54 per share to shareholders. Based on the last year's worth of payments, Ultra Electronics Holdings stock has a trailing yield of around 2.3% on the current share price of £23.48. 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! As a result, readers should always check whether Ultra Electronics Holdings has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Ultra Electronics Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Ultra Electronics Holdings paid out 57% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 9.0% of its free cash flow in the last year.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Ultra Electronics Holdings has grown its earnings rapidly, up 26% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Ultra Electronics Holdings could have strong prospects for future increases to the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Ultra Electronics Holdings has lifted its dividend by approximately 5.7% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.