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Chemtrade Logistics Income Fund (TSE:CHE.UN) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 28th of January, you won't be eligible to receive this dividend, when it is paid on the 23rd of February.
Chemtrade Logistics Income Fund's next dividend payment will be CA$0.05 per share, and in the last 12 months, the company paid a total of CA$0.60 per share. Calculating the last year's worth of payments shows that Chemtrade Logistics Income Fund has a trailing yield of 8.2% on the current share price of CA$7.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Chemtrade Logistics Income Fund
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Chemtrade Logistics Income Fund reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 50% of its free cash flow as dividends, a comfortable payout level for most companies.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Chemtrade Logistics Income Fund was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Chemtrade Logistics Income Fund's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.