Readers hoping to buy Close Brothers Group plc (LON:CBG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 19th of March will not receive the dividend, which will be paid on the 22nd of April.
Close Brothers Group's next dividend payment will be UK£0.23 per share, and in the last 12 months, the company paid a total of UK£0.66 per share. Last year's total dividend payments show that Close Brothers Group has a trailing yield of 6.2% on the current share price of £10.64. If you buy this business for its dividend, you should have an idea of whether Close Brothers Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Close Brothers Group paid out 52% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Close Brothers Group earnings per share are up 5.5% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Close Brothers Group has lifted its dividend by approximately 5.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Close Brothers Group got what it takes to maintain its dividend payments? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
However if you're still interested in Close Brothers Group as a potential investment, you should definitely consider some of the risks involved with Close Brothers Group. Case in point: We've spotted 1 warning sign for Close Brothers Group you should be aware of.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.