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Readers hoping to buy Corby Spirit and Wine Limited (TSE:CSW.A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase Corby Spirit and Wine's shares before the 29th of November in order to be eligible for the dividend, which will be paid on the 18th of December.
The company's next dividend payment will be CA$0.22 per share, on the back of last year when the company paid a total of CA$0.88 to shareholders. Calculating the last year's worth of payments shows that Corby Spirit and Wine has a trailing yield of 7.0% on the current share price of CA$12.65. 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 Corby Spirit and Wine has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Corby Spirit and Wine
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Corby Spirit and Wine paid out 95% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether Corby Spirit and Wine generated enough free cash flow to afford its dividend. Over the last year it paid out 65% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while Corby Spirit and Wine's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Click here to see how much of its profit Corby Spirit and Wine paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Corby Spirit and Wine's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.