Teekay Tankers (NYSE:TNK) Could Be A Buy For Its Upcoming Dividend

Yahoo

15-05-2025

Teekay Tankers Ltd. (NYSE:TNK) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Teekay Tankers investors that purchase the stock on or after the 19th of May will not receive the dividend, which will be paid on the 30th of May.
The company's next dividend payment will be US$1.25 per share, and in the last 12 months, the company paid a total of US$3.00 per share. Looking at the last 12 months of distributions, Teekay Tankers has a trailing yield of approximately 4.4% on its current stock price of US$45.59. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
We've discovered 3 warning signs about Teekay Tankers. View them for free.
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. That's why it's good to see Teekay Tankers paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Teekay Tankers generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 3.6% of its 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.
View our latest analysis for Teekay Tankers
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Teekay Tankers has grown its earnings rapidly, up 51% a year for the past five years. Teekay Tankers is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Teekay Tankers has delivered an average of 7.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is Teekay Tankers worth buying for its dividend? Teekay Tankers 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. There's a lot to like about Teekay Tankers, and we would prioritise taking a closer look at it.
In light of that, while Teekay Tankers has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Teekay Tankers (at least 1 which is a bit concerning), and understanding these should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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