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 Stingray Group Inc. (TSE:RAY.A) is about to go ex-dividend in just three 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Stingray Group's shares before the 29th of November in order to be eligible for the dividend, which will be paid on the 15th of December.
The company's upcoming dividend is CA$0.075 a share, following on from the last 12 months, when the company distributed a total of CA$0.30 per share to shareholders. Last year's total dividend payments show that Stingray Group has a trailing yield of 6.1% on the current share price of CA$4.95. 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 Stingray Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Stingray Group
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. Stingray Group paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Stingray Group generated enough free cash flow to afford its dividend. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Stingray Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Stingray Group's earnings per share have risen 15% per annum over the last five years. Stingray Group is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stingray Group has delivered 14% dividend growth per year on average over the past seven years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Has Stingray Group got what it takes to maintain its dividend payments? Stingray Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Stingray Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Stingray Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 3 warning signs for Stingray Group you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
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