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Be Sure To Check Out CAI International, Inc. (NYSE:CAI) Before It Goes Ex-Dividend

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·3 min read
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Readers hoping to buy CAI International, Inc. (NYSE:CAI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 10th of March to receive the dividend, which will be paid on the 25th of March.

CAI International's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Based on the last year's worth of payments, CAI International has a trailing yield of 2.8% on the current stock price of $42.19. 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 investigate whether CAI International can afford its dividend, and if the dividend could grow.

Check out our latest analysis for CAI International

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. CAI International is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 11% of its free cash flow in the last year.

It's positive to see that CAI International'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.

historic-dividend
historic-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. 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 CAI International has grown its earnings rapidly, up 26% a year for the past five years. CAI International looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Unfortunately CAI International has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Has CAI International got what it takes to maintain its dividend payments? CAI International has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in CAI International for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for CAI International (1 is a bit concerning!) that deserve your attention before investing in the shares.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.