Yahoo Finance Don't Race Out To Buy Stingray Group Inc. (TSE:RAY.A) Just Because It's Going Ex-Dividend
Stingray Group Inc. (TSE:RAY.A) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 28th of August, you won't be eligible to receive this dividend, when it is paid on the 15th of September.
Stingray Group's next dividend payment will be CA$0.075 per share, on the back of last year when the company paid a total of CA$0.30 to shareholders. Based on the last year's worth of payments, Stingray Group stock has a trailing yield of around 5.4% on the current share price of CA$5.53. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Stingray Group has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Stingray Group
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. Stingray Group distributed an unsustainably high 185% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.
It's good to see that while Stingray Group'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Stingray Group's earnings are down 4.4% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stingray Group has delivered an average of 20% per year annual increase in its dividend, based on the past five years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Stingray Group is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
To Sum It Up
Has Stingray Group got what it takes to maintain its dividend payments? It's never great to see earnings per share declining, especially when a company is paying out 185% of its profit as dividends, which we feel is uncomfortably high. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in Stingray Group's cash flows, or perhaps the company has written down some assets aggressively, reducing its income. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Stingray Group.
With that in mind though, if the poor dividend characteristics of Stingray Group don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 3 warning signs for Stingray Group that you should be aware of before investing in their shares.
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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