We Wouldn't Be Too Quick To Buy Canterbury Park Holding Corporation (NASDAQ:CPHC) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Canterbury Park Holding Corporation (NASDAQ:CPHC) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Canterbury Park Holding's shares before the 31st of March in order to be eligible for the dividend, which will be paid on the 14th of April.

The company's next dividend payment will be US$0.07 per share, on the back of last year when the company paid a total of US$0.28 to shareholders. Based on the last year's worth of payments, Canterbury Park Holding has a trailing yield of 1.5% on the current stock price of US$18.25. 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.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Canterbury Park Holding is paying out an acceptable 66% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Canterbury Park Holding generated enough free cash flow to afford its dividend.

Check out our latest analysis for Canterbury Park Holding

Click here to see how much of its profit Canterbury Park Holding paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Canterbury Park Holding's 6.7% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Canterbury Park Holding has delivered 1.3% dividend growth per year on average over the past nine years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Canterbury Park Holding? Canterbury Park Holding had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of Canterbury Park Holding don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 3 warning signs for Canterbury Park Holding that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.