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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sailfish Royalty Corp. (CVE:FISH) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. This means that investors who purchase Sailfish Royalty's shares on or after the 31st of December will not receive the dividend, which will be paid on the 15th of January.
The company's next dividend payment will be US$0.0125 per share. Last year, in total, the company distributed US$0.05 to shareholders. Calculating the last year's worth of payments shows that Sailfish Royalty has a trailing yield of 5.2% on the current share price of CA$1.38. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Sailfish Royalty
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. Last year, Sailfish Royalty paid out 261% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 10,540% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Sailfish Royalty is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
Cash is slightly more important than profit from a dividend perspective, but given Sailfish Royalty's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
Click here to see how much of its profit Sailfish Royalty paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Sailfish Royalty's earnings per share have plummeted approximately 33% a year over the previous five years.