Should Income Investors Look At Chemtrade Logistics Income Fund (TSE:CHE.UN) Before Its Ex-Dividend?
Readers hoping to buy Chemtrade Logistics Income Fund (TSE:CHE.UN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Chemtrade Logistics Income Fund investors that purchase the stock on or after the 27th of April will not receive the dividend, which will be paid on the 26th of May.
The company's upcoming dividend is CA$0.05 a share, following on from the last 12 months, when the company distributed a total of CA$0.60 per share to shareholders. Based on the last year's worth of payments, Chemtrade Logistics Income Fund has a trailing yield of 7.9% on the current stock price of CA$7.64. If you buy this business for its dividend, you should have an idea of whether Chemtrade Logistics Income Fund's dividend is reliable and sustainable. As a result, readers should always check whether Chemtrade Logistics Income Fund has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Chemtrade Logistics Income Fund
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Chemtrade Logistics Income Fund paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Chemtrade Logistics Income Fund generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.
It's positive to see that Chemtrade Logistics Income Fund'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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Chemtrade Logistics Income Fund's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
We'd also point out that Chemtrade Logistics Income Fund issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Chemtrade Logistics Income Fund's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Has Chemtrade Logistics Income Fund got what it takes to maintain its dividend payments? Earnings per share have been flat and Chemtrade Logistics Income Fund's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. In summary, it's hard to get excited about Chemtrade Logistics Income Fund from a dividend perspective.
So while Chemtrade Logistics Income Fund looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 3 warning signs for Chemtrade Logistics Income Fund (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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