We Wouldn't Be Too Quick To Buy Corus Entertainment Inc. (TSE:CJR.B) Before It Goes Ex-Dividend

By
Simply Wall St
Published
June 08, 2021
TSX:CJR.B
Source: Shutterstock

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 Corus Entertainment Inc. (TSE:CJR.B) is about to go ex-dividend in just four days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Corus Entertainment's shares on or after the 14th of June, you won't be eligible to receive the dividend, when it is paid on the 30th of June.

The company's upcoming dividend is CA$0.06 a share, following on from the last 12 months, when the company distributed a total of CA$0.24 per share to shareholders. Based on the last year's worth of payments, Corus Entertainment has a trailing yield of 3.8% on the current stock price of CA$6.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Corus Entertainment

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. Corus Entertainment paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.

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

historic-dividend
TSX:CJR.B Historic Dividend June 9th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Corus Entertainment was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Corus Entertainment's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

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

Final Takeaway

Is Corus Entertainment an attractive dividend stock, or better left on the shelf? It's hard to get used to Corus Entertainment paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Corus Entertainment has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Corus Entertainment and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for Corus Entertainment (1 is concerning!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.