Is It Worth Considering Cairn Homes plc (LON:CRN) For Its Upcoming Dividend?

By
Simply Wall St
Published
September 12, 2021
LSE:CRN
Source: Shutterstock

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cairn Homes plc (LON:CRN) is about to trade ex-dividend in the next two 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Cairn Homes investors that purchase the stock on or after the 16th of September will not receive the dividend, which will be paid on the 8th of October.

The company's next dividend payment will be €0.027 per share, on the back of last year when the company paid a total of €0.053 to shareholders. Last year's total dividend payments show that Cairn Homes has a trailing yield of 4.7% on the current share price of £0.972. If you buy this business for its dividend, you should have an idea of whether Cairn Homes's dividend is reliable and sustainable. So we need to investigate whether Cairn Homes can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Cairn Homes

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. Cairn Homes distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

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

historic-dividend
LSE:CRN Historic Dividend September 13th 2021

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Cairn Homes has grown its earnings rapidly, up 35% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cairn Homes has delivered an average of 3.2% per year annual increase in its dividend, based on the past two years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Should investors buy Cairn Homes for the upcoming dividend? It's been growing earnings per share at a pleasant rate, although its dividend payout was not well covered by earnings. Overall, Cairn Homes looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Cairn Homes you should be aware of.

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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