Cerillion PLC (LON:CER) Will Pay A UK£0.037 Dividend In Three Days

Cerillion PLC (LON:CER) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 31st of December in order to be eligible for this dividend, which will be paid on the 9th of February.

Cerillion's upcoming dividend is UK£0.037 a share, following on from the last 12 months, when the company distributed a total of UK£0.055 per share to shareholders. Based on the last year's worth of payments, Cerillion has a trailing yield of 1.4% on the current stock price of £4.07. If you buy this business for its dividend, you should have an idea of whether Cerillion's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Cerillion

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. Cerillion paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. 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. Fortunately, it paid out only 29% of its free cash flow in the past 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?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Cerillion's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 72% a year over 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. Cerillion has delivered an average of 16% per year annual increase in its dividend, based on the past five years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

The Bottom Line

Has Cerillion got what it takes to maintain its dividend payments? 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you want to look further into Cerillion, it's worth knowing the risks this business faces. Our analysis shows 1 warning sign for Cerillion and you should be aware of this before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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