WWE

World Wrestling Entertainment, Inc. (NYSE:WWE) Looks Like A Good Stock, And It’s Going Ex-Dividend Soon

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World Wrestling Entertainment, Inc. (NYSE:WWE) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 12th of March will not receive this dividend, which will be paid on the 25th of March.

World Wrestling Entertainment’s next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Looking at the last 12 months of distributions, World Wrestling Entertainment has a trailing yield of approximately 0.9% on its current stock price of $54.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether World Wrestling Entertainment has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for World Wrestling Entertainment

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately World Wrestling Entertainment’s payout ratio is modest, at just 28% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 13% of its free cash flow last year.

It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

NYSE:WWE Historic Dividend March 7th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s encouraging to see World Wrestling Entertainment has grown its earnings rapidly, up 40% a year for the past five years. World Wrestling Entertainment is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. World Wrestling Entertainment’s dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Should investors buy World Wrestling Entertainment for the upcoming dividend? World Wrestling Entertainment has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it’s cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. World Wrestling Entertainment looks solid on this analysis overall, and we’d definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We’ve spotted 1 warning sign for World Wrestling Entertainment you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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