Yahoo Finance We Wouldn't Be Too Quick To Buy Corby Spirit and Wine Limited (TSE:CSW.A) Before It Goes Ex-Dividend
Corby Spirit and Wine Limited (TSE:CSW.A) is about to trade ex-dividend in the next 4 days. 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 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. Thus, you can purchase Corby Spirit and Wine's shares before the 24th of November in order to receive the dividend, which the company will pay on the 9th of December.
The company's next dividend payment will be CA$0.22 per share, on the back of last year when the company paid a total of CA$0.96 to shareholders. Last year's total dividend payments show that Corby Spirit and Wine has a trailing yield of 5.6% on the current share price of CA$16.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Corby Spirit and Wine can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Corby Spirit and Wine
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. Corby Spirit and Wine distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (78%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's good to see that while Corby Spirit and Wine'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. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see how much of its profit Corby Spirit and Wine paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Corby Spirit and Wine's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Corby Spirit and Wine has lifted its dividend by approximately 4.6% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Corby Spirit and Wine? The company has not generated any growth in earnings per share over the 10-year timeframe we measured. Additionally, Corby Spirit and Wine is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. It's not that we think Corby Spirit and Wine is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
So if you're still interested in Corby Spirit and Wine despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 1 warning sign for Corby Spirit and Wine that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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