Just Four Days Till Canlan Ice Sports Corp. (TSE:ICE) Will Be Trading Ex-Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Canlan Ice Sports Corp. (TSE:ICE) is about to trade ex-dividend in the next four 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. Accordingly, Canlan Ice Sports investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 15th of October.
The company's next dividend payment will be CA$0.04 per share. Last year, in total, the company distributed CA$0.12 to shareholders. Last year's total dividend payments show that Canlan Ice Sports has a trailing yield of 2.9% on the current share price of CA$4.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
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. That's why it's good to see Canlan Ice Sports paying out a modest 40% of its 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. Canlan Ice Sports paid out more free cash flow than it generated - 187%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Canlan Ice Sports paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Canlan Ice Sports to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
View our latest analysis for Canlan Ice Sports
Click here to see how much of its profit Canlan Ice Sports paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Canlan Ice Sports's earnings have been skyrocketing, up 25% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Canlan Ice Sports has lifted its dividend by approximately 4.1% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
From a dividend perspective, should investors buy or avoid Canlan Ice Sports? We like that Canlan Ice Sports has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
While it's tempting to invest in Canlan Ice Sports for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Canlan Ice Sports and you should be aware of them before buying any shares.
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.