Readers hoping to buy Collectors Universe, Inc. (NASDAQ:CLCT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 13th of February in order to receive the dividend, which the company will pay on the 28th of February.
Collectors Universe's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.70 to shareholders. Based on the last year's worth of payments, Collectors Universe stock has a trailing yield of around 2.6% on the current share price of $26.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Collectors Universe has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Collectors Universe
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Collectors Universe's payout ratio is modest, at just 50% of profit. 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 distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Collectors Universe'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.
Click here to see how much of its profit Collectors Universe paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Collectors Universe, with earnings per share up 9.1% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.