Yahoo Finance Why You Might Be Interested In Chemtrade Logistics Income Fund (TSE:CHE.UN) For Its Upcoming Dividend
Readers hoping to buy Chemtrade Logistics Income Fund (TSE:CHE.UN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Chemtrade Logistics Income Fund's shares before the 29th of April in order to be eligible for the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be CA$0.055 per share, on the back of last year when the company paid a total of CA$0.60 to shareholders. Last year's total dividend payments show that Chemtrade Logistics Income Fund has a trailing yield of 7.7% on the current share price of CA$8.56. If you buy this business for its dividend, you should have an idea of whether Chemtrade Logistics Income Fund's dividend is reliable and sustainable. So we need to investigate whether Chemtrade Logistics Income Fund can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Chemtrade Logistics Income Fund
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. Chemtrade Logistics Income Fund paid out a comfortable 28% of its profit last year. 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. Luckily it paid out just 25% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. 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 encouraging to see Chemtrade Logistics Income Fund has grown its earnings rapidly, up 47% a year for the past five years. Chemtrade Logistics Income Fund is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Chemtrade Logistics Income Fund's dividend payments per share have declined at 5.8% per year on average over the past 10 years, which is uninspiring. Chemtrade Logistics Income Fund is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
Final Takeaway
Is Chemtrade Logistics Income Fund an attractive dividend stock, or better left on the shelf? Chemtrade Logistics Income Fund has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Chemtrade Logistics Income Fund looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Chemtrade Logistics Income Fund for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Chemtrade Logistics Income Fund that we strongly recommend you have a look at before investing in the company.
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.
