Don't Race Out To Buy C-Com Satellite Systems Inc. (CVE:CMI) Just Because It's Going Ex-Dividend
C-Com Satellite Systems Inc. (CVE:CMI) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase C-Com Satellite Systems' shares before the 2nd of February to receive the dividend, which will be paid on the 17th of February.
The company'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. Based on the last year's worth of payments, C-Com Satellite Systems stock has a trailing yield of around 4.2% on the current share price of CA$1.2. 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! 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 from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. C-Com Satellite Systems distributed an unsustainably high 147% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. 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 63% 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. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at C-Com Satellite Systems, with earnings per share up 3.5% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. C-Com Satellite Systems has delivered an average of 5.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy C-Com Satellite Systems for the upcoming dividend? While earnings per share have been growing slowly, C-Com Satellite Systems is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. Bottom line: C-Com Satellite Systems has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with C-Com Satellite Systems. We've identified 5 warning signs with C-Com Satellite Systems (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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