Is It Smart To Buy Ethan Allen Interiors Inc. (NYSE:ETD) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ethan Allen Interiors Inc. (NYSE:ETD) is about to trade ex-dividend in the next 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Ethan Allen Interiors' shares before the 13th of August in order to receive the dividend, which the company will pay on the 28th of August.

The company's next dividend payment will be US$0.64 per share, and in the last 12 months, the company paid a total of US$1.81 per share. Last year's total dividend payments show that Ethan Allen Interiors has a trailing yield of 6.2% on the current share price of US$29.26. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Ethan Allen Interiors can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 78% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings.

Check out our latest analysis for Ethan Allen Interiors

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Ethan Allen Interiors has grown its earnings rapidly, up 43% a year for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ethan Allen Interiors has delivered 14% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Ethan Allen Interiors an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and Ethan Allen Interiors is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Ethan Allen Interiors ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

In light of that, while Ethan Allen Interiors has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Ethan Allen Interiors that we strongly recommend you have a look at before investing in the company.

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.