Readers hoping to buy eXp World Holdings, Inc. (NASDAQ:EXPI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase eXp World Holdings' shares on or after the 11th of August will not receive the dividend, which will be paid on the 29th of August.
The company's upcoming dividend is US$0.045 a share, following on from the last 12 months, when the company distributed a total of US$0.18 per share to shareholders. Calculating the last year's worth of payments shows that eXp World Holdings has a trailing yield of 1.2% on the current share price of $15.27. If you buy this business for its dividend, you should have an idea of whether eXp World Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see eXp World Holdings paying out a modest 41% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see eXp World Holdings has grown its earnings rapidly, up 70% a year for the past five years. eXp World Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Given that eXp World Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
Has eXp World Holdings got what it takes to maintain its dividend payments? eXp World Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. eXp World Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in eXp World Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for eXp World Holdings and you should be aware of them before buying any shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
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