There's A Lot To Like About CTT - Correios De Portugal's (ELI:CTT) Upcoming €0.17 Dividend

It looks like CTT - Correios De Portugal, S.A. (ELI:CTT) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase CTT - Correios De Portugal's shares before the 14th of May to receive the dividend, which will be paid on the 16th of May.

The company's next dividend payment will be €0.17 per share, and in the last 12 months, the company paid a total of €0.17 per share. Calculating the last year's worth of payments shows that CTT - Correios De Portugal has a trailing yield of 3.9% on the current share price of €4.38. If you buy this business for its dividend, you should have an idea of whether CTT - Correios De Portugal's dividend is reliable and sustainable. As a result, readers should always check whether CTT - Correios De Portugal has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for CTT - Correios De Portugal

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CTT - Correios De Portugal paid out a comfortable 47% of its profit last year. A useful secondary check can be to evaluate whether CTT - Correios De Portugal generated enough free cash flow to afford its dividend. Luckily it paid out just 1.5% of its free 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see CTT - Correios De Portugal's earnings have been skyrocketing, up 21% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CTT - Correios De Portugal's dividend payments per share have declined at 8.2% per year on average over the past 10 years, which is uninspiring. CTT - Correios De Portugal is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Has CTT - Correios De Portugal got what it takes to maintain its dividend payments? CTT - Correios De Portugal has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about CTT - Correios De Portugal, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for CTT - Correios De Portugal and you should be aware of this before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.