Dividend Investors: Don't Be Too Quick To Buy Caledonia Investments plc (LON:CLDN) For Its Upcoming Dividend

Caledonia Investments plc (LON:CLDN) stock is about to trade ex-dividend in 3 days. You can purchase shares before the 3rd of December in order to receive the dividend, which the company will pay on the 7th of January.

Caledonia Investments's next dividend payment will be UK£0.17 per share, on the back of last year when the company paid a total of UK£0.61 to shareholders. Looking at the last 12 months of distributions, Caledonia Investments has a trailing yield of approximately 2.1% on its current stock price of £29.6. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Caledonia Investments

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Caledonia Investments's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

Click here to see how much of its profit Caledonia Investments paid out over the last 12 months.

historic-dividend

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Caledonia Investments reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Caledonia Investments has lifted its dividend by approximately 5.6% a year on average.

Get our latest analysis on Caledonia Investments's balance sheet health here.

To Sum It Up

Is Caledonia Investments an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that in mind though, if the poor dividend characteristics of Caledonia Investments don't faze you, it's worth being mindful of the risks involved with this business. We've identified 3 warning signs with Caledonia Investments (at least 2 which are potentially serious), and understanding these should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.