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It looks like CI Financial Corp. (TSE:CIX) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase CI Financial's shares before the 29th of June in order to be eligible for the dividend, which will be paid on the 15th of July.
The company's upcoming dividend is CA$0.18 a share, following on from the last 12 months, when the company distributed a total of CA$0.72 per share to shareholders. Based on the last year's worth of payments, CI Financial has a trailing yield of 5.0% on the current stock price of CA$14.32. 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! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. CI Financial paid out a comfortable 34% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at CI Financial, with earnings per share up 3.5% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CI Financial has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see. CI Financial 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.
The Bottom Line
Has CI Financial got what it takes to maintain its dividend payments? CI Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating CI Financial more closely.
In light of that, while CI Financial has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 5 warning signs for CI Financial 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.