Be Sure To Check Out Sleep Country Canada Holdings Inc. (TSE:ZZZ) Before It Goes Ex-Dividend

By
Simply Wall St
Published
May 14, 2022
TSX:ZZZ
Source: Shutterstock

It looks like Sleep Country Canada Holdings Inc. (TSE:ZZZ) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Sleep Country Canada Holdings' shares before the 19th of May to receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be CA$0.21 per share, and in the last 12 months, the company paid a total of CA$0.86 per share. Looking at the last 12 months of distributions, Sleep Country Canada Holdings has a trailing yield of approximately 3.1% on its current stock price of CA$27.7. If you buy this business for its dividend, you should have an idea of whether Sleep Country Canada Holdings'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.

Check out our latest analysis for Sleep Country Canada Holdings

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. Sleep Country Canada Holdings paid out a comfortable 29% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 19% of its free cash flow in the last year.

It's positive to see that Sleep Country Canada Holdings'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.

historic-dividend
TSX:ZZZ Historic Dividend May 14th 2022

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. For this reason, we're glad to see Sleep Country Canada Holdings's earnings per share have risen 15% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sleep Country Canada Holdings has delivered an average of 7.5% per year annual increase in its dividend, based on the past seven 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.

Final Takeaway

Is Sleep Country Canada Holdings an attractive dividend stock, or better left on the shelf? It's great that Sleep Country Canada Holdings 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. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Sleep Country Canada Holdings is facing. Case in point: We've spotted 2 warning signs for Sleep Country Canada Holdings you should be aware of.

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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