Three Days Left Until The Colonial Motor Company Limited (NZSE:CMO) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Colonial Motor Company Limited (NZSE:CMO) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Colonial Motor's shares on or after the 25th of September will not receive the dividend, which will be paid on the 6th of October.

The company's next dividend payment will be NZ$0.2352941 per share, on the back of last year when the company paid a total of NZ$0.35 to shareholders. Calculating the last year's worth of payments shows that Colonial Motor has a trailing yield of 4.3% on the current share price of NZ$8.18. 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.

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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. Colonial Motor paid out 62% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Check out our latest analysis for Colonial Motor

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Colonial Motor's earnings are down 3.4% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Colonial Motor has lifted its dividend by approximately 0.6% a year on average.

To Sum It Up

Is Colonial Motor an attractive dividend stock, or better left on the shelf? 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. In summary, it's hard to get excited about Colonial Motor from a dividend perspective.

If you want to look further into Colonial Motor, it's worth knowing the risks this business faces. To help with this, we've discovered 3 warning signs for Colonial Motor (2 are significant!) that you ought to be aware of before buying the shares.

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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.