Cogeco (TSE:CGO) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Cogeco Inc. (TSE:CGO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Thus, you can purchase Cogeco's shares before the 14th of November in order to receive the dividend, which the company will pay on the 28th of November.

The company's next dividend payment will be CA$0.922 per share, on the back of last year when the company paid a total of CA$3.42 to shareholders. Calculating the last year's worth of payments shows that Cogeco has a trailing yield of 5.9% on the current share price of CA$62.40. If you buy this business for its dividend, you should have an idea of whether Cogeco's dividend is reliable and sustainable. As a result, readers should always check whether Cogeco has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Cogeco

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Cogeco paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its cash flow 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 how much of its profit Cogeco paid out over the last 12 months.

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 Cogeco's earnings per share have risen 19% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cogeco has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has Cogeco got what it takes to maintain its dividend payments? Cogeco has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Cogeco is facing. Every company has risks, and we've spotted 1 warning sign for Cogeco you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.