Income Investors Must Know: Cogeco Communications Inc., TSE:CCA, Will Ex-Dividend Soon

Regular readers will be aware that Simply Wall Street loves its dividends. This is why it’s so exciting to see. Cogeco Communications Inc. (TSE:CCAIn the next 4 days, ) is expected to trade ex dividend. The ex-dividend date typically occurs one business day prior to the record date. This is the date when a company determines which shareholders are eligible for a dividend. This date is crucial as it could mean that a stock purchase on or after the ex-dividend date may result in a late settlement. To put it another way, investors can still purchase shares of Cogeco Communications before the 25th, January, in order to qualify for the dividend which will be paid the 9th of Februari.

The company’s upcoming dividend will be CA$0.78 per share. This follows a distribution of CA$3.10 per shares to shareholders in the past 12 months. Cogeco Communications’ trailing yield is 4.7% based on its current share price of CA$66.57. Although we love to see companies paying a dividend, it’s important to ensure that they don’t kill their golden goose. It is important to check whether the company is growing and if dividend payments are sustainable.

See our latest analysis for Cogeco Communications

Dividends paid out by a company are more than earned. This can lead to unsustainable dividends. Cogeco Communications has a modest payout ratio of 31%, which is fortunately. However, cash flows are just as important as profits in assessing a dividend. We need to determine if enough cash was generated to pay the distribution. It paid out dividends equal to 212% of its free cash flow over the past year. This is a worryingly high percentage. This could indicate that there is a possibility that the dividend will be reduced in the future, unless we are able to grasp something about the business.

Cogeco Communications paid its dividends, but the reported profits covered the dividends. Cash is more important than that, so it is not surprising that the company couldn’t generate enough money to pay its dividend. We would consider this a warning sign if Cogeco Communications continued to pay out dividends without generating enough cashflow.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Are Earnings and Dividends Growing?

The best dividend stocks are those that have consistently high earnings per share. This is because they tend to be more able to increase dividends per share. A company might have to reduce its dividends if its earnings drop enough. We are encouraged by Cogeco Communications’ steady growth, which has seen earnings per share increase 9.5% over the past five years. While earnings have grown at a steady pace, we are concerned that dividend payments have consumed the majority of the company’s cash flow in the last year.

Investors will evaluate a company’s dividend prospects by looking at its historical dividend growth rate. Cogeco Communications has averaged 12% per year in dividend growth over the last 10 years. We are happy to see dividends growing alongside earnings over many years. This may indicate that the company is looking to share in the growth.

Let’s sum it all

Investors should decide whether to buy or not Cogeco Communications. Cogeco Communications has had a decent earnings per share growth over recent times. However, it paid out less that half of its profits and 212% in cash flow during the past year. This is a disappointing outcome. While it might be worthwhile to investigate whether the company is reinvesting into growth projects that could increase earnings and dividends in future, we are not optimistic about its dividend prospects.

Cogeco Communications is not your only concern. You should also be aware of the risks that this business faces. We have some suggestions to help you. 4 warning signs for Cogeco Communications (1 is a bit worrying!) You should be aware of these facts before you buy shares.

We wouldn’t advise buying just the first dividend stock that you see. Here’s a curated list of interesting stocks that are strong dividend payers.

Let us know what you think about this article. Have a question about the content? Get in touch Get in touch with us. Alternatively, email editorial-team (at) simplywallst.com.

This article is by Simply Wall St. It is general in nature. We only provide commentary on historical data and analyst projections. Our articles are not meant to be considered financial advice. This analysis does not represent a recommendation to purchase or sell any stock and it does not consider your financial goals or financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Please note that our analysis might not include the latest announcements from price-sensitive companies or qualitative material. Simply Wall St does not hold any position in the stocks mentioned.

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