There’s a lot to love about the upcoming C$0.15 Yellow Pages (TSE:Y) dividend

Looks like Yellow Pages Limited (TSE:Y) is set to go ex-dividend in the next four days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. This means that investors who buy shares of Yellow Pages on or after February 24 will not receive the dividend, which will be paid on March 15.

The company’s next dividend payment will be C$0.15 per share. Last year, in total, the company distributed C$0.60 to shareholders. Based on last year’s payouts, Yellow Pages stock has a yield of about 4.2% on the current share price of C$14.21. Dividends are a major contributor to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by earnings and if it increases.

Check out our latest analysis for the Yellow Pages

Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Yellow Pages only pays out 22% of its after-tax profit, which is comfortably low and leaves plenty of room for adverse events. A useful secondary check can be to assess whether Yellow Pages has generated enough free cash flow to pay its dividend. The good news is that it’s only paid out 15% of its free cash flow over the past year.

It is positive to see that the Yellow Pages dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher margin. security before the dividend is reduced.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

TSX:Y Historic dividend February 19, 2022

Have earnings and dividends increased?

Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If earnings fall enough, the company could be forced to cut its dividend. That’s why it’s heartening to see that Yellow Pages revenue has skyrocketed, growing 61% annually over the past five years. Yellow Pages looks like a real growing company, with earnings per share growing at a breakneck pace and the company reinvesting most of its profits back into the business.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past two years, Pages Jaunes has increased its dividend by about 17% per year on average. It’s exciting to see that earnings and dividends per share have grown rapidly over the past few years.

Last takeaway

Should investors buy Pages Jaunes for the upcoming dividend? We like that Yellow Pages is increasing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. These characteristics suggest that the company is reinvesting in the growth of its business, while the conservative payout ratio also implies a reduced risk of dividend reduction in the future. There’s a lot to love about the Yellow Pages, and we’d rather take a closer look.

Although it’s tempting to invest in the Yellow Pages just for the dividends, you should always be aware of the risks involved. Example: we have identified 1 yellow pages warning sign you should be aware.

If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Calvin W. Soper