Is It Worth Considering Corby Spirit and Wine Limited (TSE:CSW.A) For Its Upcoming Dividend?

It looks like Corby Spirit and Wine Limited (TSE:CSW.A) is about to go ex-dividend in the next 4 days. You can purchase shares before the 24th of February in order to receive the dividend, which the company will pay on the 5th of March.

Corby Spirit and Wine's upcoming dividend is CA$0.21 a share, following on from the last 12 months, when the company distributed a total of CA$0.80 per share to shareholders. Looking at the last 12 months of distributions, Corby Spirit and Wine has a trailing yield of approximately 4.8% on its current stock price of CA$16.73. If you buy this business for its dividend, you should have an idea of whether Corby Spirit and Wine'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.

See our latest analysis for Corby Spirit and Wine

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. It paid out 76% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. 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. It paid out more than half (51%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Corby Spirit and Wine'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 Corby Spirit and Wine paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Corby Spirit and Wine earnings per share are up 8.7% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Corby Spirit and Wine has lifted its dividend by approximately 3.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has Corby Spirit and Wine got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Corby Spirit and Wine paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Corby Spirit and Wine from a dividend perspective.

However if you're still interested in Corby Spirit and Wine as a potential investment, you should definitely consider some of the risks involved with Corby Spirit and Wine. For example - Corby Spirit and Wine has 1 warning sign we think you should be aware of.

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.

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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. 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.
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