Cango Inc.'s (NYSE:CANG) Could Be A Buy 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 Cango Inc. (NYSE:CANG) is about to go ex-dividend in just 2 days. You will need to purchase shares before the 1st of May to receive the dividend, which will be paid on the 18th of May.
Cango's next dividend payment will be US$0.23 per share, on the back of last year when the company paid a total of US$1.77 to shareholders. Last year's total dividend payments show that Cango has a trailing yield of 4.8% on the current share price of $5.21. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Cango
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Cango's earnings have been skyrocketing, up 20% per annum for the past three years.
We'd also point out that Cango issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
This is Cango's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
Final Takeaway
From a dividend perspective, should investors buy or avoid Cango? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Cango appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
While it's tempting to invest in Cango for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 4 warning signs we've spotted with Cango (including 1 which is a bit concerning).
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
