In This Article:
It looks like Camellia Plc (LON:CAM) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Camellia's shares on or after the 14th of September will not receive the dividend, which will be paid on the 13th of October.
The company's next dividend payment will be UK£0.44 per share, on the back of last year when the company paid a total of UK£1.46 to shareholders. Looking at the last 12 months of distributions, Camellia has a trailing yield of approximately 2.9% on its current stock price of £50.2. 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 investigate whether Camellia can afford its dividend, and if the dividend could grow.
View our latest analysis for Camellia
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. Camellia distributed an unsustainably high 139% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Camellia fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see how much of its profit Camellia paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Camellia's earnings per share have fallen at approximately 20% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.