Only Four Days Left To Cash In On Systemax's (NYSE:SYX) Dividend
Systemax Inc. (NYSE:SYX) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 5th of March in order to be eligible for this dividend, which will be paid on the 15th of March.
Systemax's upcoming dividend is US$0.16 a share, following on from the last 12 months, when the company distributed a total of US$0.64 per share to shareholders. Calculating the last year's worth of payments shows that Systemax has a trailing yield of 1.8% on the current share price of $36.1. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Systemax has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Systemax
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. Fortunately Systemax's payout ratio is modest, at just 33% of profit. 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. It paid out an unsustainably high 205% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
While Systemax's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Systemax to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Systemax has grown its earnings rapidly, up 35% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Systemax has delivered an average of 26% per year annual increase in its dividend, based on the past five years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is Systemax an attractive dividend stock, or better left on the shelf? We like that Systemax has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. To summarise, Systemax looks okay on this analysis, although it doesn't appear a stand-out opportunity.
On that note, you'll want to research what risks Systemax is facing. For example, we've found 2 warning signs for Systemax that we recommend you consider before investing in the business.
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.
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