There’s a lot to like about Penske Automotive Group’s upcoming US $ 0.46 dividend (NYSE: PAG)
Penske Automotive Group, Inc. (NYSE: PAG) is set to trade off-dividend within the next four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is an important date to know, as any purchase of shares made after this date may mean a late settlement which does not appear on the registration date. In other words, investors can buy Penske Automotive Group shares before November 9 in order to be eligible for the dividend, which will be paid on December 1.
The company’s next dividend will be US $ 0.46 per share. Last year, in total, the company distributed US $ 1.84 to shareholders. Based on the value of last year’s payouts, Penske Automotive Group has a 1.7% return on the current share price of $ 109.7. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our goose that lays the golden eggs! Accordingly, readers should always check whether Penske Automotive Group has been able to increase its dividends or if the dividend could be reduced.
Check out our latest analysis for Penske Automotive Group
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Penske Automotive Group paid only 13% of its profits last year, which in our opinion is moderately low and leaves a lot of room for unforeseen circumstances. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It paid 9.6% of its free cash flow in the form of dividends last year, which is conservative.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. It is encouraging to see that Penske Automotive Group has grown its profits rapidly, rising 30% per year over the past five years. With rapidly growing earnings per share and the company wisely reinvesting nearly all of its earnings back into the business, Penske Automotive Group appears to be a promising growth company.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, Penske Automotive Group has increased its dividend by around 21% per year on average. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.
The bottom line
Is Penske Automotive Group worth buying for its dividend? It’s great that Penske Automotive Group is increasing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. It’s disappointing that the dividend has been cut at least once in the past, but as it stands, the low payout ratio suggests a conservative approach to dividends, which we like. It is a promising combination that should mark this company worthy of further attention.
So while Penske Automotive Group looks good from a dividend standpoint, it’s still worth being aware of the risks inherent in this title. To help you, we have discovered 5 warning signs for Penske Automotive Group (1 is potentially serious!) Which you should know before buying the shares.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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