For those investors who prioritize dividends as a means of wealth growth, a compelling opportunity is emerging: Northrop Grumman Corporation (NYSE: NOC) is set to go ex-dividend in a mere 4 days. Understanding the significance of the ex-dividend date is crucial, as it marks the point when a company designates eligible shareholders for dividend distribution. The ex-dividend date is typically one business day before the record date. For potential dividend recipients, this implies that any stock trade must be settled on or before the record date. In this case, to be eligible for the upcoming dividend of US$1.87 per share, investors need to acquire Northrop Grumman’s shares before August 25th. The dividend itself is scheduled to be paid out on September 13th.
Over the past 12 months, Northrop Grumman has distributed a total of US$7.48 per share in dividends. This forthcoming dividend equates to a 1.7% trailing yield based on the current stock price of $430.17. Dividends are a valuable income source for many shareholders, but maintaining dividend sustainability hinges on the overall health of the business. It’s crucial to evaluate whether Northrop Grumman has a track record of growing its dividends or if there’s a possibility of a reduction.
Explore our latest analysis for Northrop Grumman
Dividends are typically funded by company profits, and if a company pays out more than it earns, its dividend might be at risk of being reduced. Northrop Grumman’s dividend payout ratio was a conservative 23% of its profits last year, which provides a considerable buffer against unexpected scenarios. Additionally, while profitable companies might sometimes struggle to generate sufficient cash flow to cover dividends, Northrop Grumman distributed only 48% of its free cash flow as dividends – a level that’s comfortable for most companies.
The promising aspect is that both profits and cash flow effectively cover the dividend, indicating sustainability. This suggests that as long as earnings remain relatively stable, the dividend should remain secure.
Are Earnings and Dividends Growing? Companies with consistent growth in earnings per share often make solid dividend stocks, as they tend to have an easier time increasing dividends per share. In the case of a business downturn leading to a dividend cut, the company’s value might plummet. Encouragingly, Northrop Grumman’s earnings per share have surged by an impressive 13% annually over the past five years. The rapid earnings growth coupled with the company retaining a significant portion of earnings bodes well for future growth endeavors, with the added possibility of future dividend increases.
Evaluating dividend performance involves assessing the historical changes in dividend payments. Over the past decade, Northrop Grumman has delivered an average annual increase of 13% in its dividend payouts. This consistent growth in both earnings and dividends showcases a positive trend.
Is Northrop Grumman an appealing dividend option, or is it more prudent to consider other alternatives? With Northrop Grumman experiencing rapid earnings growth and maintaining a conservative payout ratio, the company is actively reinvesting in its operations – a highly favorable combination. The investment outlook for Northrop Grumman appears promising, warranting a closer examination.
However, while the dividend perspective is positive, it’s essential to remain informed about potential risks associated with this stock. It’s worth noting that our investment analysis has identified 2 warning signs related to Northrop Grumman, with 1 of them being too significant to ignore.