Income Investors Should Know That Capital Limited (LON:CAPD) Goes Ex-Dividend Soon
Capital Limited (LON:CAPD) is about to trade ex-dividend in the next three days. This means that investors who purchase shares on or after the 8th of April will not receive the dividend, which will be paid on the 4th of May.
Capital's next dividend payment will be US$0.013 per share, on the back of last year when the company paid a total of US$0.026 to shareholders. Based on the last year's worth of payments, Capital stock has a trailing yield of around 2.9% on the current share price of £0.645. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Capital
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. Capital has a low and conservative payout ratio of just 12% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. That's why it's comforting to see Capital's earnings have been skyrocketing, up 68% per annum for the past five years.
We'd also point out that Capital 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Capital has delivered 5.4% dividend growth per year on average over the past six years. Earnings per share have been growing much quicker than dividends, potentially because Capital is keeping back more of its profits to grow the business.
The Bottom Line
Has Capital got what it takes to maintain its dividend payments? We like that Capital has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Capital from a dividend perspective.
On that note, you'll want to research what risks Capital is facing. For example, we've found 3 warning signs for Capital (1 can't be ignored!) that deserve your attention before investing in the shares.
If you're in the market for dividend stocks, we recommend checking our list of top 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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