CES Energy Solutions Corp. (TSE:CEU) Looks Interesting, And It's About To Pay A 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 CES Energy Solutions Corp. (TSE:CEU) is about to go ex-dividend in just 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase CES Energy Solutions' shares before the 28th of June in order to receive the dividend, which the company will pay on the 15th of July.

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$0.12 per share. Looking at the last 12 months of distributions, CES Energy Solutions has a trailing yield of approximately 1.8% on its current stock price of CA$6.77. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for CES Energy Solutions

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CES Energy Solutions paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 10.0% of its free cash flow in the last year.

It's positive to see that CES Energy Solutions'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see CES Energy Solutions's earnings have been skyrocketing, up 33% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, CES Energy Solutions looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CES Energy Solutions's dividend payments per share have declined at 5.9% 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.

To Sum It Up

Has CES Energy Solutions got what it takes to maintain its dividend payments? It's great that CES Energy Solutions is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. CES Energy Solutions looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks CES Energy Solutions is facing. Our analysis shows 2 warning signs for CES Energy Solutions and you should be aware of these before buying any 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com