Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Dover Motorsports, Inc. (NYSE: DVD) is set to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is an important date to know, as any purchase of shares made after this date may mean a late settlement which does not appear on the registration date. Therefore, if you buy Dover Motorsports shares on or after November 9, you will not be able to receive the dividend when it is paid on December 10.

The company’s next dividend payment will be US $ 0.04 per share. Last year, in total, the company distributed US $ 0.08 to shareholders. Calculating the value of last year’s payouts shows that Dover Motorsports has a 3.5% return on the current stock price of $ 2.3. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. As a result, readers should always check to see if Dover Motorsports has been able to increase its dividends or if the dividend could be reduced.

Check out our latest analysis for Dover Motorsports

Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Fortunately, Dover Motorsports’ payout ratio is modest, at just 31% of profits. Having said that, even very profitable companies can sometimes not generate enough cash to pay the dividend, which is why we always need to check if the dividend is covered by the cash flow.

Click here to see how much of its profits Dover Motorsports has paid in the past 12 months.

NYSE: Historical Dividend DVD November 4, 2021

Have profits and dividends increased?

Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. For this reason, we are pleased to see that Dover Motorsports earnings per share have grown 19% per year over the past five years.

Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Since our data began nine years ago, Dover Motorsports has increased its dividend by around 8.0% per year on average. It is encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.

Last takeaways

Is Dover Motorsports worth buying for its dividend? We are happy to see that the company has improved its earnings per share while contributing a small percentage of its revenue. However, it’s not great to see him paying what we consider to be an uncomfortably high percentage of his cash flow. Overall, it’s not a bad combination, but we think there is probably a more attractive dividend outlook.

While it is tempting to invest in Dover Motorsports purely for dividends, you should always be aware of the risks involved. For example, we found 3 warning signs for Dover Motorsports (1 should not be ignored!) That deserve your attention before investing in stocks.

However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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