It looks like Cineworld Group plc (LON:CINE) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 12th of December, you won't be eligible to receive this dividend, when it is paid on the 10th of January.
Cineworld Group's upcoming dividend is UK£0.037 a share, following on from the last 12 months, when the company distributed a total of UK£0.15 per share to shareholders. Calculating the last year's worth of payments shows that Cineworld Group has a trailing yield of 5.3% on the current share price of £2.15. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Cineworld Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 89% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Cineworld Group's earnings per share have been shrinking at 2.9% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cineworld Group has delivered an average of 1.4% per year annual increase in its dividend, based on the past ten years of dividend payments.
Final Takeaway
Should investors buy Cineworld Group for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall, it's hard to get excited about Cineworld Group from a dividend perspective.
Curious what other investors think of Cineworld Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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