Yahoo Finance CanWel Building Materials Group Ltd. (TSE:CWX) Looks Interesting, And It's About To Pay A Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CanWel Building Materials Group Ltd. (TSE:CWX) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 30th of March will not receive the dividend, which will be paid on the 15th of April.
CanWel Building Materials Group's next dividend payment will be CA$0.16 per share, and in the last 12 months, the company paid a total of CA$0.48 per share. Last year's total dividend payments show that CanWel Building Materials Group has a trailing yield of 5.2% on the current share price of CA$9.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for CanWel Building Materials Group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. CanWel Building Materials Group is paying out an acceptable 68% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether CanWel Building Materials Group generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that CanWel Building Materials Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, CanWel Building Materials Group's earnings per share have been growing at 17% a year for the past five years. CanWel Building Materials Group is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CanWel Building Materials Group's dividend payments per share have declined at 5.0% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Is CanWel Building Materials Group an attractive dividend stock, or better left on the shelf? CanWel Building Materials Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. CanWel Building Materials Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while CanWel Building Materials Group has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 4 warning signs for CanWel Building Materials Group that we strongly recommend you have a look at before investing in the company.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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