Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy Cancom SE (ETR:COK) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cancom SE (ETR:COK) is about to trade ex-dividend in the next 4 days. 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 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. This means that investors who purchase Cancom's shares on or after the 6th of June will not receive the dividend, which will be paid on the 10th of June.
The company's next dividend payment will be €1.00 per share, and in the last 12 months, the company paid a total of €1.00 per share. Calculating the last year's worth of payments shows that Cancom has a trailing yield of 3.2% on the current share price of €30.80. If you buy this business for its dividend, you should have an idea of whether Cancom's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Cancom
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, Cancom paid out 97% 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 Cancom generated enough free cash flow to afford its dividend. The good news is it paid out just 21% of its free cash flow in the last year.
It's good to see that while Cancom'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 the company's payout ratio, plus analyst estimates of its future dividends.
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. It's not encouraging to see that Cancom's earnings are effectively flat 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cancom has delivered 17% dividend growth per year on average over the past 10 years.
Final Takeaway
Has Cancom got what it takes to maintain its dividend payments? Earnings per share have been effectively flat, which is a bit of a concern given the company is paying out 97% of its profit as dividends, which we feel is uncomfortably high. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Cancom.
Although, if you're still interested in Cancom and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 1 warning sign with Cancom and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
