Capital Appreciation Limited (JSE:CTA) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Capital Appreciation Limited (JSE:CTA) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Capital Appreciation's shares before the 26th of June in order to be eligible for the dividend, which will be paid on the 1st of July.

The company's next dividend payment will be R00.0575 per share, and in the last 12 months, the company paid a total of R0.082 per share. Last year's total dividend payments show that Capital Appreciation has a trailing yield of 6.6% on the current share price of R01.25. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Capital Appreciation

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. Capital Appreciation paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

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. Fortunately for readers, Capital Appreciation's earnings per share have been growing at 10% a year for 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. In the past seven years, Capital Appreciation has increased its dividend at approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Capital Appreciation an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and Capital Appreciation is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Capital Appreciation ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

On that note, you'll want to research what risks Capital Appreciation is facing. For example - Capital Appreciation has 3 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com