CPT Global Limited (ASX:CGO) stock is about to trade ex-dividend in four days. This means that investors who purchase shares on or after the 10th of September will not receive the dividend, which will be paid on the 16th of November.
CPT Global's next dividend payment will be AU$0.013 per share, on the back of last year when the company paid a total of AU$0.013 to shareholders. Looking at the last 12 months of distributions, CPT Global has a trailing yield of approximately 6.8% on its current stock price of A$0.185. If you buy this business for its dividend, you should have an idea of whether CPT Global's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. CPT Global 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 CPT Global didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 6.5% of its free cash flow as dividends last year, which is conservatively low.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. CPT Global reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CPT Global has seen its dividend decline 14% per annum on average over the past 10 years, which is not great to see.
Remember, you can always get a snapshot of CPT Global's financial health, by checking our visualisation of its financial health, here.
Has CPT Global got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of CPT Global's dividend merits.
In light of that, while CPT Global has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with CPT Global (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.
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.
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.
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