Yahoo Finance We Wouldn't Be Too Quick To Buy Corus Entertainment Inc. (TSE:CJR.B) Before It Goes Ex-Dividend
Corus Entertainment Inc. (TSE:CJR.B) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 14th of September will not receive the dividend, which will be paid on the 30th of September.
Corus Entertainment's next dividend payment will be CA$0.06 per share, on the back of last year when the company paid a total of CA$0.24 to shareholders. Based on the last year's worth of payments, Corus Entertainment stock has a trailing yield of around 7.8% on the current share price of CA$3.08. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Corus Entertainment
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. Corus Entertainment lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 17% of its free cash flow last year.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Corus Entertainment was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Corus Entertainment's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Get our latest analysis on Corus Entertainment's balance sheet health here.
Final Takeaway
Is Corus Entertainment worth buying for its dividend? It's hard to get used to Corus Entertainment paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Corus Entertainment is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that being said, if you're still considering Corus Entertainment as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 2 warning signs for Corus Entertainment you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
