Cake Box Holdings Plc (LON:CBOX) Is About To Go Ex-Dividend, And It Pays A 2.0% Yield

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 Cake Box Holdings Plc (LON:CBOX) is about to go ex-dividend in just three days. If you purchase the stock on or after the 3rd of December, you won't be eligible to receive this dividend, when it is paid on the 23rd of December.

Cake Box Holdings's next dividend payment will be UK£0.018 per share. Last year, in total, the company distributed UK£0.037 to shareholders. Calculating the last year's worth of payments shows that Cake Box Holdings has a trailing yield of 2.0% on the current share price of £1.88. If you buy this business for its dividend, you should have an idea of whether Cake Box Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Cake Box Holdings

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. Cake Box Holdings has a low and conservative payout ratio of just 24% of its income after tax. 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 22% of its free cash flow in the last year.

It's positive to see that Cake Box 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.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. From this viewpoint, it's unfortunate that earnings per share have declined 8.7% over the last year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cake Box Holdings has delivered 24% dividend growth per year on average over the past two years.

Final Takeaway

Should investors buy Cake Box Holdings for the upcoming dividend? Cake Box Holdings has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about Cake Box Holdings from a dividend perspective.

In light of that, while Cake Box Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Cake Box Holdings you should know about.

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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