Delek US Holdings, Inc. (NYSE:DK) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Delek US Holdings' shares on or after the 10th of November, you won't be eligible to receive the dividend, when it is paid on the 18th of November.
The company's upcoming dividend is US$0.30 a share, following on from the last 12 months, when the company distributed a total of US$1.02 per share to shareholders. Based on the last year's worth of payments, Delek US Holdings has a trailing yield of 1.6% on the current stock price of US$62.49. If you buy this business for its dividend, you should have an idea of whether Delek US Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. That's why it's good to see Delek US Holdings paying out a modest 27% of its earnings. 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. Luckily it paid out just 9.3% of its free cash flow 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.
Check out our latest analysis for Delek US Holdings
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Delek US Holdings's earnings per share have dropped 21% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Delek US Holdings has delivered an average of 5.4% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
Should investors buy Delek US Holdings for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's hard to get excited about Delek US Holdings from a dividend perspective.
In light of that, while Delek US Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 4 warning signs for Delek US Holdings (2 are significant!) that you ought to be aware of before buying the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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