Here's What We Like About Chemtrade Logistics Income Fund's (TSE:CHE.UN) Upcoming Dividend

Readers hoping to buy Chemtrade Logistics Income Fund (TSE:CHE.UN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. This means that investors who purchase Chemtrade Logistics Income Fund's shares on or after the 29th of April will not receive the dividend, which will be paid on the 31st of May.

The company's next dividend payment will be CA$0.055 per share, and in the last 12 months, the company paid a total of CA$0.60 per share. Last year's total dividend payments show that Chemtrade Logistics Income Fund has a trailing yield of 7.8% on the current share price of CA$8.44. If you buy this business for its dividend, you should have an idea of whether Chemtrade Logistics Income Fund'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.

View our latest analysis for Chemtrade Logistics Income Fund

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Chemtrade Logistics Income Fund paid out a comfortable 28% of its profit last year. 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 25% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Chemtrade Logistics Income Fund has grown its earnings rapidly, up 47% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Chemtrade Logistics Income Fund's dividend payments per share have declined at 5.8% per year on average over the past 10 years, which is uninspiring. Chemtrade Logistics Income Fund is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Chemtrade Logistics Income Fund an attractive dividend stock, or better left on the shelf? It's great that Chemtrade Logistics Income Fund 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. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Chemtrade Logistics Income Fund for the dividends alone, you should always be mindful of the risks involved. For example, Chemtrade Logistics Income Fund has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.