Yahoo Finance Why It Might Not Make Sense To Buy C-Com Satellite Systems Inc. (CVE:CMI) For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that C-Com Satellite Systems Inc. (CVE:CMI) is about to go ex-dividend in just three 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 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 C-Com Satellite Systems' shares before the 1st of November in order to be eligible for the dividend, which will be paid on the 16th of November.
The company's next dividend payment will be CA$0.013 per share. Last year, in total, the company distributed CA$0.05 to shareholders. Based on the last year's worth of payments, C-Com Satellite Systems has a trailing yield of 3.1% on the current stock price of CA$1.63. If you buy this business for its dividend, you should have an idea of whether C-Com Satellite Systems's dividend is reliable and sustainable. 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.
See 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. 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 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see C-Com Satellite Systems earnings per share are up 3.6% per annum 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. In the last 10 years, C-Com Satellite Systems has lifted its dividend by approximately 5.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is C-Com Satellite Systems worth buying for its 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. 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 being said, if you're still considering C-Com Satellite Systems as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 6 warning signs for C-Com Satellite Systems (1 is potentially serious!) that deserve your attention before investing in the shares.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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