Readers hoping to buy DHT Holdings, Inc. (NYSE:DHT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, DHT Holdings investors that purchase the stock on or after the 21st of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.95 to shareholders. Calculating the last year's worth of payments shows that DHT Holdings has a trailing yield of 8.2% on the current share price of US$11.58. 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 DHT Holdings has been able to grow its dividends, or if the dividend might be cut.

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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. DHT Holdings is paying out an acceptable 73% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether DHT Holdings generated enough free cash flow to afford its dividend. It paid out 91% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While DHT Holdings's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were DHT Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for DHT Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:DHT Historic Dividend May 16th 2025

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see DHT Holdings's earnings per share have risen 17% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

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The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, DHT Holdings has increased its dividend at approximately 28% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is DHT Holdings worth buying for its dividend? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 91% of its cashflow, which is uncomfortably high. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you're not too concerned about DHT Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 1 warning sign for DHT Holdings that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only 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, 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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