It Might Not Be A Great Idea To Buy Vox Royalty Corp. (TSE:VOXR) For Its Next Dividend

Vox Royalty Corp. (TSE:VOXR) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Vox Royalty investors that purchase the stock on or after the 27th of March will not receive the dividend, which will be paid on the 12th of April.

The company's next dividend payment will be US$0.012 per share, on the back of last year when the company paid a total of US$0.044 to shareholders. Based on the last year's worth of payments, Vox Royalty stock has a trailing yield of around 2.4% on the current share price of CA$2.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Vox Royalty

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. Vox Royalty lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Vox Royalty didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.

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 fall far enough, the company could be forced to cut its dividend. Vox Royalty was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

We'd also point out that Vox Royalty issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Vox Royalty has delivered an average of 9.5% per year annual increase in its dividend, based on the past two years of dividend payments. 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.

We update our analysis on Vox Royalty every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Has Vox Royalty got what it takes to maintain its dividend payments? It's hard to get used to Vox Royalty paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Vox Royalty.

So if you're still interested in Vox Royalty despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To that end, you should learn about the 2 warning signs we've spotted with Vox Royalty (including 1 which is a bit concerning).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.