Be Sure To Check Out Copa Holdings, S.A. (NYSE:CPA) Before It Goes Ex-Dividend

Copa Holdings, S.A. (NYSE:CPA) stock is about to trade ex-dividend in four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Copa Holdings' shares before the 28th of February in order to be eligible for the dividend, which will be paid on the 15th of March.

The company's upcoming dividend is US$1.61 a share, following on from the last 12 months, when the company distributed a total of US$6.44 per share to shareholders. Based on the last year's worth of payments, Copa Holdings has a trailing yield of 6.5% on the current stock price of US$99.34. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Copa Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Copa Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Copa Holdings's payout ratio is modest, at just 25% of profit.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Copa Holdings has grown its earnings rapidly, up 43% a year for the past five years. Copa Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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. Copa Holdings has delivered an average of 8.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Copa Holdings for the upcoming dividend? Companies like Copa Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Copa Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Copa Holdings for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Copa Holdings that you should be aware of before investing in their 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.