Is It Worth Considering CBo Territoria SA (EPA:CBOT) For Its Upcoming Dividend?

It looks like CBo Territoria SA (EPA:CBOT) is about to go ex-dividend in the next 4 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 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 CBo Territoria's shares before the 12th of June to receive the dividend, which will be paid on the 14th of June.

The company's next dividend payment will be €0.24 per share. Last year, in total, the company distributed €0.24 to shareholders. Calculating the last year's worth of payments shows that CBo Territoria has a trailing yield of 6.3% on the current share price of €3.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for CBo Territoria

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CBo Territoria is paying out an acceptable 61% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether CBo Territoria generated enough free cash flow to afford its dividend. Fortunately, it paid out only 25% of its free cash flow in the past year.

It's positive to see that CBo Territoria'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 how much of its profit CBo Territoria paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at CBo Territoria, with earnings per share up 4.8% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, CBo Territoria has increased its dividend at approximately 6.3% a year on average. 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.

To Sum It Up

Is CBo Territoria worth buying for its dividend? While earnings per share growth has been modest, CBo Territoria's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. To summarise, CBo Territoria looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while CBo Territoria looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for CBo Territoria that we recommend you consider before investing in the business.

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.