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CCL Industries Inc. (TSE:CCL.B) Looks Interesting, And It's About To Pay A Dividend

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CCL Industries Inc. (TSE:CCL.B) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase CCL Industries' shares on or after the 15th of June, you won't be eligible to receive the dividend, when it is paid on the 30th of June.

The company's next dividend payment will be CA$0.24 per share. Last year, in total, the company distributed CA$0.96 to shareholders. Looking at the last 12 months of distributions, CCL Industries has a trailing yield of approximately 1.6% on its current stock price of CA$59.29. If you buy this business for its dividend, you should have an idea of whether CCL Industries's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for CCL Industries

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. That's why it's good to see CCL Industries paying out a modest 26% of its earnings. 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. Thankfully its dividend payments took up just 33% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. For this reason, we're glad to see CCL Industries's earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, CCL Industries has increased its dividend at approximately 21% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy CCL Industries for the upcoming dividend? CCL Industries has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for CCL Industries that you should be aware of before investing in their 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.