Weatherford International plc (NASDAQ:WFRD) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Weatherford International's shares on or after the 6th of May will not receive the dividend, which will be paid on the 5th of June.
The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Last year's total dividend payments show that Weatherford International has a trailing yield of 2.3% on the current share price of US$42.61. If you buy this business for its dividend, you should have an idea of whether Weatherford International's dividend is reliable and sustainable. As a result, readers should always check whether Weatherford International 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. Weatherford International paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Weatherford International generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 11% of its cash flow last year.
It's positive to see that Weatherford International'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.
View our latest analysis for Weatherford International
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 earnings fall far enough, the company could be forced to cut its dividend. Weatherford International's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 63% a year over the past five years.
Given that Weatherford International has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Weatherford International an attractive dividend stock, or better left on the shelf? Weatherford International 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, it's hard to get excited about Weatherford International from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Weatherford International and you should be aware of them before buying any 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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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.