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It looks like Teekay Tankers Ltd. (NYSE:TNK) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Teekay Tankers' shares on or after the 12th of November, you won't be eligible to receive the dividend, when it is paid on the 22nd of November.
The company's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$3.00 to shareholders. Based on the last year's worth of payments, Teekay Tankers has a trailing yield of 6.4% on the current stock price of US$46.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Teekay Tankers has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Teekay Tankers
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Teekay Tankers has a low and conservative payout ratio of just 2.0% of its income after tax. A useful secondary check can be to evaluate whether Teekay Tankers generated enough free cash flow to afford its dividend. Luckily it paid out just 16% of its free cash flow last year.
It's positive to see that Teekay Tankers's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Teekay Tankers's earnings have been skyrocketing, up 41% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Teekay Tankers looks like a promising growth company.