Yahoo Finance Income Investors Should Know That Chesapeake Utilities Corporation (NYSE:CPK) Goes Ex-Dividend Soon
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 Chesapeake Utilities Corporation (NYSE:CPK) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Chesapeake Utilities' shares before the 14th of September in order to receive the dividend, which the company will pay on the 5th of October.
The company's upcoming dividend is US$0.48 a share, following on from the last 12 months, when the company distributed a total of US$1.92 per share to shareholders. Last year's total dividend payments show that Chesapeake Utilities has a trailing yield of 1.5% on the current share price of $131.2. 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! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Chesapeake Utilities
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Chesapeake Utilities paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether Chesapeake Utilities generated enough free cash flow to afford its dividend. It paid out an unsustainably high 207% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
Chesapeake Utilities paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Chesapeake Utilities's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Chesapeake Utilities's earnings per share have risen 11% per annum over the last five years. Earnings have been growing at a decent rate, 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. In the past 10 years, Chesapeake Utilities has increased its dividend at approximately 8.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy Chesapeake Utilities for the upcoming dividend? We like that Chesapeake Utilities 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, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
On that note, you'll want to research what risks Chesapeake Utilities is facing. For example - Chesapeake Utilities has 2 warning signs we think you should be aware of.
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.
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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