Yahoo Finance Here's Why We're Wary Of Buying CapitaLand Investment's (SGX:9CI) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CapitaLand Investment Limited (SGX:9CI) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase CapitaLand Investment's shares before the 28th of April in order to receive the dividend, which the company will pay on the 10th of May.
The company's next dividend payment will be S$0.12 per share. Last year, in total, the company distributed S$0.12 to shareholders. Calculating the last year's worth of payments shows that CapitaLand Investment has a trailing yield of 3.1% on the current share price of SGD3.82. 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! As a result, readers should always check whether CapitaLand Investment has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for CapitaLand Investment
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. CapitaLand Investment paid out 71% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (86%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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. With that in mind, we're discomforted by CapitaLand Investment's 21% per annum decline in earnings in the past three years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Unfortunately CapitaLand Investment has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
From a dividend perspective, should investors buy or avoid CapitaLand Investment? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
With that in mind though, if the poor dividend characteristics of CapitaLand Investment don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 4 warning signs for CapitaLand Investment (1 is concerning!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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