Interested In Cake Box Holdings' (LON:CBOX) Upcoming UK£0.034 Dividend? You Have Four Days Left

It looks like Cake Box Holdings Plc (LON:CBOX) is about to go ex-dividend in the next 4 days. 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. Meaning, you will need to purchase Cake Box Holdings' shares before the 21st of November to receive the dividend, which will be paid on the 12th of December.

The company's next dividend payment will be UK£0.034 per share, and in the last 12 months, the company paid a total of UK£0.09 per share. Looking at the last 12 months of distributions, Cake Box Holdings has a trailing yield of approximately 4.8% on its current stock price of UK£1.89. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Cake Box Holdings has been able to grow its dividends, or if the dividend might be cut.

See 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 is paying out an acceptable 73% of its profit, a common payout level among most companies. 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. It paid out 99% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While Cake Box Holdings's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Cake Box Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Cake Box Holdings's earnings per share have been growing at 11% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last six years, Cake Box Holdings has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Cake Box Holdings for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Cake Box Holdings paid out a much higher percentage of its free cash flow, which makes us uncomfortable. To summarise, Cake Box Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Cake Box Holdings, it's worth knowing the risks this business faces. Our analysis shows 2 warning signs for Cake Box Holdings and you should be aware of these before buying any shares.

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.