In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Corby Spirit and Wine Limited (TSE:CSW.A) is about to trade ex-dividend in the next 4 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 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 11th of September in order to be eligible for the dividend, which will be paid on the 27th of September.
The company's next dividend payment will be CA$0.22 per share, and in the last 12 months, the company paid a total of CA$0.85 per share. Based on the last year's worth of payments, Corby Spirit and Wine stock has a trailing yield of around 6.4% on the current share price of CA$13.38. 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 check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Corby Spirit and Wine
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. Last year Corby Spirit and Wine paid out 101% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 85% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's good to see that while Corby Spirit and Wine's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
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 earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Corby Spirit and Wine's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.