Is It Smart To Buy Canterbury Park Holding Corporation (NASDAQ:CPHC) Before It Goes Ex-Dividend?
Canterbury Park Holding Corporation (NASDAQ:CPHC) stock is about to trade ex-dividend in day or so. 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Canterbury Park Holding's shares on or after the 29th of June will not receive the dividend, which will be paid on the 14th of July.
The company's upcoming dividend is US$0.07 a share, following on from the last 12 months, when the company distributed a total of US$0.28 per share to shareholders. Based on the last year's worth of payments, Canterbury Park Holding stock has a trailing yield of around 1.2% on the current share price of $23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Canterbury Park Holding
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Canterbury Park Holding has a low and conservative payout ratio of just 5.2% of its income after tax. A useful secondary check can be to evaluate whether Canterbury Park Holding generated enough free cash flow to afford its dividend. Luckily it paid out just 3.3% of its free cash flow last year.
It's positive to see that Canterbury Park Holding'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 how much of its profit Canterbury Park Holding paid out over the last 12 months.
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. It's encouraging to see Canterbury Park Holding has grown its earnings rapidly, up 22% a year for the past five years. Canterbury Park Holding earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, six years ago, Canterbury Park Holding has lifted its dividend by approximately 1.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Canterbury Park Holding is keeping back more of its profits to grow the business.
Final Takeaway
From a dividend perspective, should investors buy or avoid Canterbury Park Holding? Canterbury Park Holding has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
So while Canterbury Park Holding looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Canterbury Park Holding you should be aware of.
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.
