Why It Might Not Make Sense To Buy Dominion Lending Centres Inc. (TSE:DLCG) For Its Upcoming Dividend

Dominion Lending Centres Inc. (TSE:DLCG) stock is about to trade ex-dividend in three 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 important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Dominion Lending Centres' shares before the 2nd of September in order to receive the dividend, which the company will pay on the 15th of September.

The company's next dividend payment will be CA$0.04 per share. Last year, in total, the company distributed CA$0.16 to shareholders. Calculating the last year's worth of payments shows that Dominion Lending Centres has a trailing yield of 1.8% on the current share price of CA$8.80. 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! We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dominion Lending Centres reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Check out our latest analysis for Dominion Lending Centres

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Dominion Lending Centres 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last nine years, Dominion Lending Centres has lifted its dividend by approximately 14% a year on average.

Remember, you can always get a snapshot of Dominion Lending Centres's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Dominion Lending Centres 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. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Dominion Lending Centres. To help with this, we've discovered 2 warning signs for Dominion Lending Centres (1 is concerning!) that you ought to be aware of before buying the shares.

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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.