Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy C-Com Satellite Systems Inc. (CVE:CMI) For Its Upcoming Dividend
C-Com Satellite Systems Inc. (CVE:CMI) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 2nd of August, you won't be eligible to receive this dividend, when it is paid on the 20th of August.
C-Com Satellite Systems's next dividend payment will be CA$0.013 per share, and in the last 12 months, the company paid a total of CA$0.05 per share. Calculating the last year's worth of payments shows that C-Com Satellite Systems has a trailing yield of 3.0% on the current share price of CA$1.64. If you buy this business for its dividend, you should have an idea of whether C-Com Satellite Systems's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for C-Com Satellite Systems
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. C-Com Satellite Systems paid out more than half (69%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that C-Com Satellite Systems'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 how much of its profit C-Com Satellite Systems paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. C-Com Satellite Systems's earnings per share have fallen at approximately 6.4% a year over the previous 5 years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 7 years, C-Com Satellite Systems has lifted its dividend by approximately 7.6% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
To Sum It Up
Is C-Com Satellite Systems an attractive dividend stock, or better left on the shelf? While earnings per share are shrinking, it's encouraging to see that at least C-Com Satellite Systems's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. It's not that we think C-Com Satellite Systems is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Curious about whether C-Com Satellite Systems has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
