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C-Com Satellite Systems Inc.'s (CVE:CMI) investors are due to receive a payment of CA$0.0125 per share on 17th of August. This means the dividend yield will be fairly typical at 2.7%.
C-Com Satellite Systems Doesn't Earn Enough To Cover Its Payments
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 182% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Earnings per share could rise by 3.1% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 180% over the next year.
C-Com Satellite Systems Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.03 in 2012 to the most recent total annual payment of CA$0.05. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 3.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The earnings growth is anaemic, and the company is paying out 182% of its profit. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.
C-Com Satellite Systems' Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, C-Com Satellite Systems has 7 warning signs (and 2 which are a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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