Here's What We Like About Capital Appreciation's (JSE:CTA) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Capital Appreciation Limited (JSE:CTA) is about to trade ex-dividend in the next three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Capital Appreciation investors that purchase the stock on or after the 31st of December will not receive the dividend, which will be paid on the 6th of January.

The company's next dividend payment will be R00.045 per share, on the back of last year when the company paid a total of R0.085 to shareholders. Based on the last year's worth of payments, Capital Appreciation has a trailing yield of 5.7% on the current stock price of R01.49. 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! As a result, readers should always check whether Capital Appreciation has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Capital Appreciation

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Capital Appreciation is paying out an acceptable 65% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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. This is why it's a relief to see Capital Appreciation earnings per share are up 9.7% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Capital Appreciation has delivered 11% dividend growth per year on average over the past seven years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Capital Appreciation? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.

However if you're still interested in Capital Appreciation as a potential investment, you should definitely consider some of the risks involved with Capital Appreciation. Every company has risks, and we've spotted 2 warning signs for Capital Appreciation you should know about.

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.