There's A Lot To Like About Deere's (NYSE:DE) Upcoming US$0.76 Dividend
Readers hoping to buy Deere & Company (NYSE: DE) for their dividend will have to make their move shortly as the stock is about to trade ex-dividend. You must buy stocks before December 30th to receive the dividend, which will be paid on February 8th.
Deere's upcoming dividend is $ 0.76 per share, after the last 12 months when the company paid a total of $ 3.04 per share to shareholders. Based on last year's payments, Deere has a trailing yield of 1.1% versus its current share price of $ 269.22. Dividends are a significant contributor to long-term owners' return on capital, but only if the dividend continues to be paid. We have to see if the dividend is covered by earnings and if it is growing.
Check out our latest analysis for Deere
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When a company pays more dividends than it earns, the dividend can no longer be sustainable - hardly an ideal situation. So it's good to see Deere pays a modest 35% of its income. Even so, even highly profitable companies sometimes don't generate enough cash to pay the dividend. Therefore, we should always check whether the dividend is covered by the cash flow. The good news is that it only paid out 20% of its free cash flow last year.
It's good to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend will be sustainable as long as earnings don't fall steeply.
Click here to see the company's payout ratio and analyst estimates of future dividends.
Has income and dividends increased?
Companies with steadily growing earnings per share generally make the best dividend stocks because it is usually easier for them to grow dividends per share. Investors love dividends. So if earnings go down and dividends go down, expect a stock to sell heavily at the same time. With that in mind, we're encouraged by the steady growth at Deere, where earnings per share have increased an average of 8.6% over the past five years. Management has reinvested more than half of the company's profits within the business, and the company has been able to use this retained capital to grow profits. Companies that reinvest heavily in themselves tend to get stronger over time, which can bring attractive perks like higher profits and dividends.
Many investors rate a company's dividend performance by rating how much dividend payments have changed over time. Deere has averaged 11% dividend growth per year for the past 10 years. We're excited to see dividends growing alongside earnings for several years. This could be a sign that the company intends to share the growth with shareholders.
Should investors buy or avoid Deere from a dividend perspective? Earnings per share growth has increased slightly, and Deere pays less than half of its earnings and cash flow in dividends. This is interesting for a number of reasons, as it suggests management may reinvest heavily in the business, but it also leaves room to raise the dividend in a timely manner. It might be nice to see earnings grow faster, but Deere is conservative with its dividend payouts and could still do reasonably well over the long term. It is a promising combination that this company should pay closer attention to.
With that in mind, you'd like to research what risks Deere is exposed to. Our analysis shows 1 warning sign for Deere and one you should be aware of before buying any stock.
A common investment mistake is buying the first interesting stock you see. Here is a list of promising dividend stocks with a yield greater than 2% and an upcoming dividend.
This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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