Looks like Wyndham Hotels & Resorts, Inc. (NYSE: WH) is set to go ex-dividend in the next 3 days. Generally, the ex-dividend date is one business day before the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not be on the company’s books as of the record date. Therefore, if you buy Wyndham Hotels & Resorts stock on or after September 13, you will not be eligible to receive the dividend when it is paid on September 28.
The company’s next dividend payment will be $0.32 per share. Last year, in total, the company distributed US$1.28 to shareholders. Based on last year’s payouts, Wyndham Hotels & Resorts stock has a yield of about 1.9% on the current stock price of $66.78. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. We therefore need to check whether dividend payments are covered and whether profits are increasing.
See our latest review for Wyndham Hotels & Resorts
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Fortunately, Wyndham Hotels & Resorts’ payout ratio is modest, at just 32% of profits. Still, cash flow is even more important than earnings in evaluating a dividend, so we need to see if the company has generated enough cash to pay its distribution. The good thing is that dividends were well covered by free cash flow, with the company paying out 25% of its free cash flow last year.
It is positive to see that the Wyndham Hotels & Resorts dividend is covered by both earnings and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio generally suggests a higher large margin of safety before the dividend is cut.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Luckily for readers, earnings per share for Wyndham Hotels & Resorts have grown 17% annually over the past five years. The company managed to grow its profits at a rapid pace, while reinvesting most of the profits back into the business. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Wyndham Hotels & Resorts has achieved an average annual increase of 6.4% per year in its dividend, based on the last four years of dividend payments. We are pleased to see dividends rising alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.
Should investors buy Wyndham Hotels & Resorts for the next dividend? Wyndham Hotels & Resorts increased earnings per share while simultaneously reinvesting in the business. Unfortunately, it has cut the dividend at least once in the past four years, but the conservative payout ratio makes the current dividend look sustainable. Overall, we think this is an attractive combination worthy of further research.
On that note, you’ll want to research the risks that Wyndham Hotels & Resorts face. We have identified 3 warning signs with Wyndham Hotels & Resorts (at least 1, which is a little nasty), and understanding them should be part of your investment process.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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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.
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