Dividend Investors: Don't Be Too Quick To Buy Caledonia Investments plc (LON:CLDN) For Its Upcoming Dividend

Readers hoping to buy Caledonia Investments plc (LON:CLDN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 3rd of December in order to be eligible for this dividend, which will be paid on the 7th of January.

Caledonia Investments's next dividend payment will be UK£0.17 per share, on the back of last year when the company paid a total of UK£0.61 to shareholders. Looking at the last 12 months of distributions, Caledonia Investments has a trailing yield of approximately 2.1% on its current stock price of £29.6. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Caledonia Investments

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. Caledonia Investments reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see how much of its profit Caledonia Investments paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Caledonia Investments was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Caledonia Investments has delivered an average of 5.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Remember, you can always get a snapshot of Caledonia Investments's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Should investors buy Caledonia Investments for the upcoming dividend? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Caledonia Investments. To help with this, we've discovered 3 warning signs for Caledonia Investments (2 are a bit unpleasant!) that you ought to be aware of before buying the shares.

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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