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 Concurrent Technologies Plc (LON:CNC) is about to go ex-dividend in just 2 days. You can purchase shares before the 26th of September in order to receive the dividend, which the company will pay on the 11th of October.
Concurrent Technologies's next dividend payment will be UK£0.01 per share, on the back of last year when the company paid a total of UK£0.02 to shareholders. Based on the last year's worth of payments, Concurrent Technologies stock has a trailing yield of around 3.5% on the current share price of £0.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Concurrent Technologies has been able to grow its dividends, or if the dividend might be cut.
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 Concurrent Technologies paying out a modest 41% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 44% of its free cash flow in the past year.
It's positive to see that Concurrent Technologies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Concurrent Technologies has grown its earnings rapidly, up 42% a year for the past five years. Concurrent Technologies is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Concurrent Technologies has increased its dividend at approximately 5.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Concurrent Technologies is keeping back more of its profits to grow the business.
Is Concurrent Technologies an attractive dividend stock, or better left on the shelf? We love that Concurrent Technologies is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Concurrent Technologies looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Keen to explore more data on Concurrent Technologies's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
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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.