Interested In CTI Logistics' (ASX:CLX) Upcoming AU$0.025 Dividend? You Have Four Days Left

It looks like CTI Logistics Limited (ASX:CLX) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, CTI Logistics investors that purchase the stock on or after the 8th of March will not receive the dividend, which will be paid on the 8th of April.

The company's next dividend payment will be AU$0.025 per share, on the back of last year when the company paid a total of AU$0.05 to shareholders. Calculating the last year's worth of payments shows that CTI Logistics has a trailing yield of 4.8% on the current share price of A$1.04. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether CTI Logistics has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for CTI Logistics

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. That's why it's good to see CTI Logistics paying out a modest 38% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that CTI Logistics'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 CTI Logistics paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by CTI Logistics's 17% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CTI Logistics's dividend payments are broadly unchanged compared to where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Final Takeaway

Has CTI Logistics got what it takes to maintain its dividend payments? CTI Logistics has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about CTI Logistics from a dividend perspective.

So while CTI Logistics looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 3 warning signs for CTI Logistics (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

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.