Satellite radio operator Sirius XM (SIRI 2.92%) has a generous dividend policy. The company started sending out quarterly dividend payments in November 2016 and has raised the payout in each November announcement since then.
Today, the forward dividend yield is 3.5%. The digital media icon has never been a member of the S&P 500 (^GSPC 0.80%) index, but if it were, its yield would rank in the top 17% of its components.
But Sirius shares are trading at multi-year lows right now. The rich dividend yield springs from low share prices rather than lavish payout checks. Is the company headed toward a cash-saving dividend cut?
Sirius XM will spend about $409 on dividends in 2024
Let's see how much Sirius XM is spending on dividends this year.
The company is paying $0.0266 per share, per quarter. If all is well, the rate will probably go up in the November round, as it has for the last seven years. But let's imagine Sirius holding off on the payout boost this time, since I can't calculate or guess the size of a future raise.
So, at 2.66 cents per share each quarter, multiplied by four quarters and 3.845 billion shares, the total payout amounts to $409 million. That's up from $383 million in 2023.
Last year, Sirius XM generated $1.19 billion of free cash flows. Dividends consumed 32% of those cash profits. The company also spent $274 million on stock buybacks in 2023, so the cash return to shareholders accounted for 55% of free cash flows.
What's next?
But the first quarter of 2024 marked the weakest single-quarter cash flows since 2012. Dividends accounted for 76% of the cash profits. Even worse, Sirius didn't repurchase any shares despite low stock prices. A boosted buyback rate would signal confidence in the company's long-term prospects, but Sirius couldn't afford it.
Sirius investors should watch the cash flow trend closely. At this rate, the company may soon need to clamp down on its dividend payouts to keep the satellite signals flowing.
