Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ryder System, Inc. (NYSE:R) is about to trade ex-dividend in the next three days. This means that investors who purchase shares on or after the 20th of November will not receive the dividend, which will be paid on the 18th of December.
Ryder System's next dividend payment will be US$0.56 per share, and in the last 12 months, the company paid a total of US$2.24 per share. Last year's total dividend payments show that Ryder System has a trailing yield of 4.0% on the current share price of $55.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Ryder System can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Ryder System reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 11% of its free cash flow in the last year.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Ryder System reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Ryder System has lifted its dividend by approximately 8.4% a year on average.
Remember, you can always get a snapshot of Ryder System's financial health, by checking our visualisation of its financial health, here.
Should investors buy Ryder System for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: Ryder System has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Although, if you're still interested in Ryder System and want to know more, you'll find it very useful to know what risks this stock faces. To that end, you should learn about the 3 warning signs we've spotted with Ryder System (including 1 which makes us a bit uncomfortable).
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.