Combined Motor Holdings Limited (JSE:CMH) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Combined Motor Holdings' shares on or after the 11th of December, you won't be eligible to receive the dividend, when it is paid on the 17th of December.
The company's next dividend payment will be R01.02 per share, on the back of last year when the company paid a total of R3.22 to shareholders. Based on the last year's worth of payments, Combined Motor Holdings stock has a trailing yield of around 9.9% on the current share price of R032.55. 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 Combined Motor Holdings has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Combined Motor Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Combined Motor Holdings is paying out an acceptable 70% of its profit, a common payout level among most companies. 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 35% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Combined Motor Holdings'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 the company's payout ratio, plus analyst estimates of its future dividends.
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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Combined Motor Holdings's earnings per share have been growing at 10% a year for the past five years. Combined Motor Holdings has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.