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Is C-Com Satellite Systems Inc. (CVE:CMI) A Strong Dividend Stock?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, C-Com Satellite Systems Inc. (CVE:CMI) has paid dividends to shareholders, and these days it yields 4.5%. Does C-Com Satellite Systems tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for C-Com Satellite Systems

5 questions to ask before buying a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Is it the top 25% annual dividend yield payer?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Is its earnings sufficient to payout dividend at the current rate?

  • Will it be able to continue to payout at the current rate in the future?

TSXV:CMI Historical Dividend Yield December 19th 18
TSXV:CMI Historical Dividend Yield December 19th 18

How well does C-Com Satellite Systems fit our criteria?

C-Com Satellite Systems has a trailing twelve-month payout ratio of 155%, meaning the dividend is not sufficiently covered by its earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

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If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view C-Com Satellite Systems as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, C-Com Satellite Systems has a yield of 4.5%, which is high for Communications stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into C-Com Satellite Systems’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for CMI’s future growth? Take a look at our free research report of analyst consensus for CMI’s outlook.

  2. Valuation: What is CMI worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CMI is currently mispriced by the market.

  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.