Should Income Investors Look At Calian Group Ltd. (TSE:CGY) Before Its Ex-Dividend?
Calian Group Ltd. (TSE:CGY) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Calian Group investors that purchase the stock on or after the 8th of December will not receive the dividend, which will be paid on the 27th of December.
The company's next dividend payment will be CA$0.28 per share, on the back of last year when the company paid a total of CA$1.12 to shareholders. Based on the last year's worth of payments, Calian Group stock has a trailing yield of around 2.0% on the current share price of CA$55.51. 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 Calian Group can afford its dividend, and if the dividend could grow.
View our latest analysis for Calian Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Calian Group is paying out an acceptable 69% of its profit, a common payout level among most companies. 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. It distributed 27% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Calian Group'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Calian Group's 5.4% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Calian Group's dividend payments are effectively flat on where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.
The Bottom Line
Is Calian Group worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Calian Group today.
Wondering what the future holds for Calian Group? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
