We wouldn’t be too quick to buy Douglas Dynamics, Inc. (NYSE: PLOW) before it goes ex-dividend
Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Douglas Dynamics, Inc. (NYSE: PLOW) is set to be ex-dividend in just four days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. As a result, Douglas Dynamics investors who purchase the shares on or after June 17 will not receive the dividend, which will be paid on June 30.
The company’s next dividend will be US $ 0.28 per share, and over the past 12 months the company has paid a total of US $ 1.14 per share. Looking at the last 12 months of distributions, Douglas Dynamics has a rolling return of about 2.6% on its current price of $ 43.35. Dividends are an important source of income for many shareholders, but the health of the business is crucial to sustaining these dividends. As a result, readers should always check whether Douglas Dynamics has been able to increase its dividends or if the dividend could be reduced.
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Douglas Dynamics’ dividend is not well covered by earnings as the company lost money last year. This is not a lasting state of affairs, so it would be worth investigating whether profits are expected to pick up. Since the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If the cash income does not cover the dividend, the company would have to pay cash dividends to the bank or by borrowing money, which is not sustainable in the long run. Fortunately, she has only paid out 36% of her free cash flow in the past year.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
NYSE: PLOW Historical Dividend June 12, 2021
Have profits and dividends increased?
Companies with declining profits are riskier for dividend shareholders. If profits fall enough, the company could be forced to cut its dividend. Douglas Dynamics was unprofitable last year, and unfortunately the general trend suggests that its profits have declined over the past five years, leading us to question whether the dividend is sustainable.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past 10 years, Douglas Dynamics has increased its dividend to around 4.6% per year on average.
Is Douglas Dynamics worth buying for its dividend? We are a little uncomfortable paying a dividend while being in deficit. However, we note that the dividend was covered by cash flow. It’s not the most attractive proposition from a dividend standpoint, and we would probably drop this one for now.
However, if you are still interested in Douglas Dynamics and want to learn more, it will be very helpful for you to know the risks that this title faces. For example, we found 3 warning signs for Douglas Dynamics (1 is a bit nasty!) That deserve your attention before investing in stocks.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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