Q: Help me square this circle. Pbh has earnings of 2.23 per share. It is also paying a dividend of 3.40 per share. Is this sustainable and is pbh worth taking a position in. Thanks
5i Research Answer:
Dividends are paid with 'cash' not earnings. This sounds strange but in reality earnings often included lots of non-cash charges. We prefer to look at cash flow when considering dividends. In the last 12 months, PBH had $434M in operating cash flow and paid out $134M in dividends. Its payout ratio is more than acceptable. That being said, we would like to see better operating performance and lower debt, and would today consider it a HOLD.