DPS is greater than the EPS - Why?

[BennoBrisbane]

I am looking at a stock SPN and I noticed that the DPS is greater than the EPS. Does this mean that the company is paying the dividend from a loan? This seems a bit wrong doesn't it? So if a stock as an EPS that is negative but it is paying a dividend, does that mean the company is making a loss but is still paying a dividend? I would have thought EPS would need to be greater than the DPS to pay a dividend or is it more important to have a dividend paid than to look after the long term future of the company?

 

[Krusty the Klown]

Re: DPS is greater the EPS - Why?

One possibility could be that the data was reported on different dates.

So that the dividend may have last been paid 12 months ago, but the earnings were updated 2 months ago.

 

[skc]

Re: DPS is greater the EPS - Why?

I am looking at a stock SPN and I noticed that the DPS is greater than the EPS. Does this mean that the company is paying the dividend from a loan? This seems a bit wrong doesn't it? So if a stock as an EPS that is negative but it is paying a dividend, does that mean the company is making a loss but is still paying a dividend? I would have thought EPS would need to be greater than the DPS to pay a dividend or is it more important to have a dividend paid than to look after the long term future of the company?

EPS often contains non-cash items like writing off asset book values. It doesn't mean the company can't afford the dividends from cash / operating earnings.

 

[doctorj]

Can pay dividends from retained earnings and ofcourse as others have pointed out that earnings does not necessary equate to incremental cash.

That's not to say some companies don't finance by dividends through loans, in the same way they might use loans for working capital.

 

[Krusty the Klown]

That's not to say some companies don't finance by dividends through loans, in the same way they might use loans for working capital.

I remember Telstra did that a few years ago.