Stingray Group (TSE:RAY.A) Could Be A Buy For Its Upcoming Dividend
Stingray Group Inc. (TSE:RAY.A) is about to trade ex-dividend in the next 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 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. Therefore, if you purchase Stingray Group's shares on or after the 29th of November, you won't be eligible to receive the dividend, when it is paid on the 15th of December.
The company's upcoming dividend is CA$0.075 a share, following on from the last 12 months, when the company distributed a total of CA$0.30 per share to shareholders. Based on the last year's worth of payments, Stingray Group stock has a trailing yield of around 5.7% on the current share price of CA$5.23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Stingray Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Stingray Group paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Stingray Group generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Stingray 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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Stingray Group's earnings have been skyrocketing, up 69% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Stingray Group could have strong prospects for future increases to the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Stingray Group has delivered an average of 12% per year annual increase in its dividend, based on the past eight years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Stingray Group worth buying for its dividend? Stingray Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Stingray Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Stingray Group for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Stingray Group that we recommend you consider before investing in the business.
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.
