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 Collection House Limited (ASX:CLH) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 2nd of October will not receive this dividend, which will be paid on the 25th of October.
Collection House's next dividend payment will be AU$0.04 per share, and in the last 12 months, the company paid a total of AU$0.08 per share. Looking at the last 12 months of distributions, Collection House has a trailing yield of approximately 6.4% on its current stock price of A$1.28. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Collection House paying out a modest 37% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Collection House, with earnings per share up 8.7% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Collection House has lifted its dividend by approximately 5.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy Collection House for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Collection House looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for Collection House? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.