It looks like Chesswood Group Limited (TSE:CHW) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Chesswood Group's shares before the 29th of July to receive the dividend, which will be paid on the 16th of August.
The company's next dividend payment will be CA$0.03 per share, and in the last 12 months, the company paid a total of CA$0.24 per share. Calculating the last year's worth of payments shows that Chesswood Group has a trailing yield of 3.1% on the current share price of CA$11.66. If you buy this business for its dividend, you should have an idea of whether Chesswood Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Chesswood Group paid out just 14% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Chesswood Group, with earnings per share up 7.2% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Chesswood Group's dividend payments per share have declined at 2.8% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Is Chesswood Group worth buying for its dividend? Chesswood Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Chesswood Group more closely.
On that note, you'll want to research what risks Chesswood Group is facing. Our analysis shows 5 warning signs for Chesswood Group that we strongly recommend you have a look at before investing in the company.
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.
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