U.S. Markets closed

We Wouldn't Be Too Quick To Buy Element Fleet Management Corp. (TSE:EFN) Before It Goes Ex-Dividend

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Element Fleet Management Corp. (TSE:EFN) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 27th of September will not receive this dividend, which will be paid on the 15th of October.

Element Fleet Management's upcoming dividend is CA$0.04 a share, following on from the last 12 months, when the company distributed a total of CA$0.2 per share to shareholders. Calculating the last year's worth of payments shows that Element Fleet Management has a trailing yield of 1.7% on the current share price of CA$10.62. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Element Fleet Management

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. Element Fleet Management reported a loss last year, so it's not great to see that it has continued paying a dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

TSX:EFN Historical Dividend Yield, September 22nd 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Element Fleet Management reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

We'd also point out that Element Fleet Management issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Element Fleet Management has delivered 16% dividend growth per year on average over the past four years.

Get our latest analysis on Element Fleet Management's balance sheet health here.

The Bottom Line

Is Element Fleet Management an attractive dividend stock, or better left on the shelf? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Curious what other investors think of Element Fleet Management? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.