At present, the satellite tv for pc radio veteran gives a beneficiant dividend yield of three.5%. Why is it so excessive and the way a lot will the corporate spend on dividends in 2024?
Satellite tv for pc radio operator Sirius XM (SIRI -1.31%) has a beneficiant dividend coverage. The corporate started paying its quarterly dividend in November 2016 and has elevated its payout every November since then.
At present, the ahead dividend yield is 3.5%. The digital media icon has by no means been a member S&P 500 (^GSPC 0.12%) index, but when it did, its return can be within the prime 17% of its constituents.
However now Sirius shares are buying and selling at multi-year lows. Excessive dividend yields come from low inventory costs, not from beneficiant pay checks. Is the corporate headed for a dividend minimize to save cash?
Sirius XM will spend about $409 in dividends in 2024
Let’s examine how a lot Sirius XM will spend on dividends this yr.
The corporate pays $0.0266 per share per quarter. If all goes effectively, the speed is more likely to rise in November, because it has for the previous seven years. However we could say that this time Sirius is delaying the pay improve, since I am unable to calculate or guess the scale of the longer term improve.
So at 2.66 cents per share every quarter, multiplied by 4 quarters and three.845 billion shares, the whole payout is $409 million. That compares to $383 million in 2023.
Sirius XM generated $1.19 billion in free money stream final yr. Dividends accounted for 32% of those money income. The corporate additionally spent $274 million on share buybacks in 2023, giving shareholders a money return of 55% of free money stream.
What’s subsequent?
However the first quarter of 2024 marked the weakest money stream in a single quarter since 2012. Dividends accounted for 76% of money income. To make issues worse, Sirius didn’t repurchase any shares regardless of the low inventory costs. A rise within the buyout price would point out confidence within the firm’s long-term prospects, however Sirius couldn’t afford that.
Sirius buyers ought to preserve an in depth eye on the money stream pattern. At this price, the corporate could quickly want to chop its dividend to maintain satellite tv for pc indicators going.
Anders Bylund has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
