C-Com Satellite Systems Inc. (CVE:CMI) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 3rd of May, you won't be eligible to receive this dividend, when it is paid on the 18th of May.
C-Com Satellite Systems's upcoming dividend is CA$0.013 a share, following on from the last 12 months, when the company distributed a total of CA$0.05 per share to shareholders. Based on the last year's worth of payments, C-Com Satellite Systems stock has a trailing yield of around 1.5% on the current share price of CA$3.28. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether C-Com Satellite Systems has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. C-Com Satellite Systems distributed an unsustainably high 124% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while C-Com Satellite Systems's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that C-Com Satellite Systems's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. C-Com Satellite Systems has delivered 5.8% dividend growth per year on average over the past nine years.
The Bottom Line
Has C-Com Satellite Systems got what it takes to maintain its dividend payments? The company has not generated any growth in earnings per share over the nine-year timeframe we measured. Plus, C-Com Satellite Systems's paying out a high percentage of its earnings and more than half its cash flow. 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.
With that in mind though, if the poor dividend characteristics of C-Com Satellite Systems don't faze you, it's worth being mindful of the risks involved with this business. For example - C-Com Satellite Systems has 4 warning signs we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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