Wheaton Precious Metals Corp. (TSE:WPM) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. In other words, investors can purchase Wheaton Precious Metals’ shares before the 2nd of April in order to be eligible for the dividend, which will be paid on the 15th of April.
The company’s next dividend payment will be US$0.155 per share, and in the last 12 months, the company paid a total of US$0.60 per share. Based on the last year’s worth of payments, Wheaton Precious Metals stock has a trailing yield of around 1.3% on the current share price of CA$63.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Wheaton Precious Metals can afford its dividend, and if the dividend could grow.
View our latest analysis for Wheaton Precious Metals
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. Wheaton Precious Metals is paying out an acceptable 51% of its profit, a common payout level among most companies. 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. Over the last year, it paid out dividends equivalent to 354% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Wheaton Precious Metals is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
Wheaton Precious Metals paid out less in dividends than it reported in profits, but unfortunately it didn’t generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Wheaton Precious Metals’s ability to maintain its dividend.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see Wheaton Precious Metals earnings per share are up 4.2% per annum over the last five years. Earnings have been growing somewhat, but we’re concerned dividend payments consumed most of the company’s cash flow over the past year.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Wheaton Precious Metals has lifted its dividend by approximately 3.3% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Wheaton Precious Metals an attractive dividend stock, or better left on the shelf? Earnings per share have grown somewhat, although Wheaton Precious Metals paid out over half its profits and the dividend was not well covered by free cash flow. It’s not that we think Wheaton Precious Metals is a bad company, but these characteristics don’t generally lead to outstanding dividend performance.
Ever wonder what the future holds for Wheaton Precious Metals? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.