Could Tribune Publishing Company (NASDAQ:TPCO) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.
With a five-year payment history and a 7.7% yield, many investors probably find Tribune Publishing intriguing. We'd agree the yield does look enticing. During the year, the company also conducted a buyback equivalent to around 0.5% of its market capitalisation. That said, the recent jump in the share price will make Tribune Publishing's dividend yield look smaller, even though the company prospects could be improving. Some simple analysis can reduce the risk of holding Tribune Publishing for its dividend, and we'll focus on the most important aspects below.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Although it reported a loss over the past 12 months, Tribune Publishing currently pays a dividend. A medium payout ratio strikes a good balance between paying dividends, and keeping enough back to invest in the business. One of the risks is that management reinvests the retained capital poorly instead of paying a higher dividend.
With a strong net cash balance, Tribune Publishing investors may not have much to worry about in the near term from a dividend perspective.
We update our data on Tribune Publishing every 24 hours, so you can always get our latest analysis of its financial health, here.
From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. Looking at the data, we can see that Tribune Publishing has been paying a dividend for the past five years. During the past five-year period, the first annual payment was US$0.70 in 2015, compared to US$1.00 last year. Dividends per share have grown at approximately 7.4% per year over this time. Tribune Publishing's dividend payments have fluctuated, so it hasn't grown 7.4% every year, but the CAGR is a useful rule of thumb for approximating the historical growth.
It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Tribune Publishing might have put its house in order since then, but we remain cautious.
Dividend Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Tribune Publishing's EPS have fallen by approximately 60% per year during the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Tribune Publishing's earnings per share, which support the dividend, have been anything but stable.
Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Firstly, we like that Tribune Publishing has a low and conservative payout ratio. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Tribune Publishing out there.
Now, if you want to look closer, it would be worth checking out our free research on Tribune Publishing management tenure, salary, and performance.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.