Yahoo Finance CareTech Holdings PLC (LON:CTH) Is About To Go Ex-Dividend, And It Pays A 2.4% Yield
Readers hoping to buy CareTech Holdings PLC (LON:CTH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase CareTech Holdings' shares on or after the 3rd of March will not receive the dividend, which will be paid on the 4th of May.
The company's next dividend payment will be UK£0.095 per share, and in the last 12 months, the company paid a total of UK£0.14 per share. Calculating the last year's worth of payments shows that CareTech Holdings has a trailing yield of 2.4% on the current share price of £5.88. 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 CareTech Holdings can afford its dividend, and if the dividend could grow.
See our latest analysis for CareTech Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately CareTech Holdings's payout ratio is modest, at just 49% of profit. A useful secondary check can be to evaluate whether CareTech Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that CareTech Holdings'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?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see CareTech Holdings's earnings per share have been shrinking at 4.9% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, CareTech Holdings has lifted its dividend by approximately 8.9% a year on average.
To Sum It Up
Is CareTech Holdings worth buying for its dividend? CareTech Holdings has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy CareTech Holdings today.
On that note, you'll want to research what risks CareTech Holdings is facing. Every company has risks, and we've spotted 1 warning sign for CareTech Holdings you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
