Why It Might Not Make Sense To Buy CTI Logistics Limited (ASX:CLX) For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CTI Logistics Limited (ASX:CLX) is about to go ex-dividend in just 4 days. You can purchase shares before the 12th of April in order to receive the dividend, which the company will pay on the 28th of April.
CTI Logistics's next dividend payment will be AU$0.02 per share. Last year, in total, the company distributed AU$0.04 to shareholders. Looking at the last 12 months of distributions, CTI Logistics has a trailing yield of approximately 4.8% on its current stock price of A$0.83. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for CTI Logistics
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CTI Logistics paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.
Click here to see how much of its profit CTI Logistics paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. CTI Logistics was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CTI Logistics's dividend payments are effectively flat on where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
Remember, you can always get a snapshot of CTI Logistics's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Is CTI Logistics an attractive dividend stock, or better left on the shelf? This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
With that in mind though, if the poor dividend characteristics of CTI Logistics don't faze you, it's worth being mindful of the risks involved with this business. Be aware that CTI Logistics is showing 4 warning signs in our investment analysis, and 2 of those are significant...
If you're in the market for dividend stocks, we recommend checking our list of top 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.
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