NASDAQ:EBAY) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 31st of August to receive the dividend, which will be paid on the 18th of September.” data-reactid=”28″ type=”text”>Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see eBay Inc. (NASDAQ:EBAY) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 31st of August to receive the dividend, which will be paid on the 18th of September.
eBay’s next dividend payment will be US$0.16 per share, on the back of last year when the company paid a total of US$0.64 to shareholders. Based on the last year’s worth of payments, eBay has a trailing yield of 1.1% on the current stock price of $58.05. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether eBay has been able to grow its dividends, or if the dividend might be cut.
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. eBay paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 15% of its cash flow last year.
It’s positive to see that eBay’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.
here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″ type=”text”>Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. eBay’s earnings per share have fallen at approximately 5.6% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. eBay has delivered 6.9% dividend growth per year on average over the past two years.
From a dividend perspective, should investors buy or avoid eBay? eBay has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we’re not hugely bearish on the stock, but there are likely better dividend investments out there.
3 warning signs for eBay and you should be aware of them before buying any shares.” data-reactid=”55″ type=”text”>In light of that, while eBay has an appealing dividend, it’s worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for eBay and you should be aware of them before buying any shares.
a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.” data-reactid=”56″ type=”text”>A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.