Collins Property Group Limited (JSE:CPP) Will Pay A R00.50 Dividend In Three Days

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 Collins Property Group Limited (JSE:CPP) is about to go ex-dividend in just three days. The ex-dividend date is two business days before a company's record date in most cases, 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. Therefore, if you purchase Collins Property Group's shares on or after the 4th of June, you won't be eligible to receive the dividend, when it is paid on the 9th of June.

The company's upcoming dividend is R00.50 a share, following on from the last 12 months, when the company distributed a total of R1.00 per share to shareholders. Looking at the last 12 months of distributions, Collins Property Group has a trailing yield of approximately 9.6% on its current stock price of R010.40. If you buy this business for its dividend, you should have an idea of whether Collins Property Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Collins Property Group paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Collins Property Group generated enough free cash flow to afford its dividend. It paid out 84% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Collins Property Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Collins Property Group

Click here to see how much of its profit Collins Property Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Collins Property Group has grown its earnings rapidly, up 29% 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. Collins Property Group has delivered 32% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Collins Property Group got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Collins Property Group is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Collins Property Group's dividend merits.

While it's tempting to invest in Collins Property Group for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 5 warning signs for Collins Property Group (1 is a bit concerning) you should be aware of.

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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.