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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CML Microsystems plc (LON:CML) is about to go ex-dividend in just 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, CML Microsystems investors that purchase the stock on or after the 1st of August will not receive the dividend, which will be paid on the 16th of August.
The company's next dividend payment will be UK£0.06 per share, and in the last 12 months, the company paid a total of UK£0.11 per share. Last year's total dividend payments show that CML Microsystems has a trailing yield of 3.5% on the current share price of UK£3.10. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for CML Microsystems
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. It paid out 85% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether CML Microsystems generated enough free cash flow to afford its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that CML Microsystems's earnings are down 4.0% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, CML Microsystems has lifted its dividend by approximately 5.8% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. CML Microsystems is already paying out 85% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.