Some investors rely on dividends to grow their wealth, and if you’re one of those dividend achievers, you might be intrigued to learn that. Trinity Industries, Inc. (NYSE: TRN) is about to get a dividend in just 3 days. The dividend date is usually one business day prior to the record date which is the date on which the company determines which shareholders are eligible to receive the dividend. It is important to be aware of the previous maturity date because any trade on the stock must be settled on or before the registration date. Accordingly, Trinity Industries investors who buy the stock on or after January 13th will not receive a dividend, which will be paid on January 31.
The next payment of the company’s dividend will be $0.23 per share. Last year, in total, the company distributed $0.84 to shareholders. Calculating the value of last year’s payments shows Trinity Industries to have a post return of 3.0% on the current share price of $31.17. If you bought this business for its dividend, you should have an idea of whether Trinity Industries’ earnings are reliable and sustainable. So we need to check if Trinity Industries can afford its dividend, and whether dividends can be increased.
Check out our latest analysis for Trinity Industries
If the company pays more dividends than it makes, the dividend could become unsustainable – the situation is hardly ideal. Trinity Industries’ earnings are not well covered by earnings, as the company lost money last year. This is not a sustainable case, so it would be worth checking if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If the cash dividends do not cover the dividend, the company will have to pay the dividend out of cash in the bank, or by borrowing money, both of which are unsustainable in the long run. Trinity Industries paid out more free cash flow than it generated — 178%, to be exact — last year, which we think is alarmingly high. It’s hard to consistently pay out more cash than you generate without borrowing or using company money, so we wonder how the company justifies this level of payment.
Click here to see the company’s payout percentage, as well as analyst estimates of its future earnings.
Are profits and dividends increasing?
When dividends are low, it becomes more difficult to analyze dividend companies and own them safely. If the business goes into a recession and profits are reduced, the company can see its value drop sharply. Trinity Industries was unprofitable last year, and unfortunately, the general trend is that its earnings have been declining for the past five years, which makes us wonder if earnings are sustainable at all.
The main way that most investors will evaluate a company’s earnings forecast is by checking the historical rate of earnings growth. Since our data began, 10 years ago, Trinity Industries has raised its dividend by about 19% per year on average.
Remember, you can always get a snapshot of Trinity Industries’ financial health, by checking out our perception of its financial health, here.
to be summarized
Is Trinity Industries an attractive dividend stock, or better to leave it on the shelves? It’s hard to get used to Trinity Industries paying dividends despite reporting a loss over the past year. Even worse, the dividend is not well covered by the cash flow. It’s not the most attractive proposal from a dividend perspective, and we’d probably miss that one for the time being.
With that being said, if you’re still considering Trinity Industries as an investment, you’ll find it helpful to know the risks this stock faces. For example, Trinity Industries owns 2 warning signs (and 1 that can’t be ignored) We think you should know.
However, we don’t recommend buying only the first share of the dividend you see. Below is a list of interesting dividend stocks with greater than 2% yield and upcoming dividends.
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This article by Simply Wall St is general in nature. We provide comments based only on historical data and analyst expectations using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, nor does it take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by essential data. Note that our analysis may not include the company’s most recent price-sensitive ads or quality materials. Wall Street simply has no position in any of the stocks mentioned.