Should income investors turn to Cerner Corporation (NASDAQ: CERN) before its ex-dividend?
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Cerner Corporation (NASDAQ: CERN) is set to trade ex-dividend within the next four days. The ex-dividend date is one business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. This means that you will need to buy Cerner shares by December 23 to receive the dividend, which will be paid on January 11.
The company’s upcoming dividend is US $ 0.27 per share, continuing the past 12 months when the company has distributed a total of US $ 0.88 per share to shareholders. Based on last year’s payouts, Cerner has a rolling 1.2% on the current price of $ 89.77. We love to see companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our goose that lays the golden eggs! It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Cerner paid 51% of its profits to investors last year, a normal payout level for most companies. Having said that, even very profitable companies can sometimes not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by the cash flow. The good thing is that dividends were well covered by free cash flow, with the company paying 23% of its cash flow last year.
It is positive to see that Cerner’s 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 greater margin of profitability. security before the dividend is cut.
NasdaqGS: CERN Historical Dividend December 18, 2021
Have profits and dividends increased?
Companies with constantly increasing earnings per share usually make the best dividend-paying stocks because they generally find it easier to increase dividends per share. If business goes into recession and the dividend is reduced, the business could experience a sharp drop in value. That’s why it’s a relief to see Cerner’s earnings per share grow 2.5% per year over the past five years. Profit growth has been weak and the company pays more than half of its profits. While it is possible to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio, the poorer the prospects for future growth of a business.
Many investors will assess a company’s dividend performance by evaluating how much dividend payments have changed over time. Cerner generated an average annual increase of 14% per year in its dividend, based on dividend payments for the past three years. We are happy to see dividends increasing along with earnings over a number of years, which may be a sign that the company intends to share the growth with its shareholders.
To sum up
Is Cerner worth buying for its dividend? While earnings per share growth has been modest, Cerner’s dividend payouts are around mid-range; without a sharp change in earnings, we think the dividend is probably quite sustainable. Fortunately, the company paid a conservatively small percentage of its free cash flow. Overall, it’s hard to be excited about Cerner from a dividend perspective.
In light of this, while Cerner has an attractive dividend, it’s worth knowing the risks involved in this stock. Concrete example: we have spotted 2 warning signs for Cerner you must be aware.
However, we don’t recommend simply buying the first dividend stock you see. here is a list of interesting dividend-paying stocks with a yield above 2% and a future dividend.
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