Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CML Group Limited (ASX:CGR) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 13th of September will not receive the dividend, which will be paid on the 8th of October.
CML Group's upcoming dividend is AU$0.014 a share, following on from the last 12 months, when the company distributed a total of AU$0.028 per share to shareholders. Last year's total dividend payments show that CML Group has a trailing yield of 6.7% on the current share price of A$0.42. 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 CML Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. CML Group is paying out an acceptable 57% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see CML Group has grown its earnings rapidly, up 22% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, CML Group has increased its dividend at approximately 8.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is CML Group worth buying for its dividend? CML Group has an acceptable payout ratio and its earnings per share have been improving at a decent rate. We think this is a pretty attractive combination, and would be interested in investigating CML Group more closely.
Curious what other investors think of CML Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.