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CPT Global Limited (ASX:CGO) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy CPT Global Limited (ASX:CGO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 4th of March, you won't be eligible to receive this dividend, when it is paid on the 29th of March.

CPT Global's next dividend payment will be AU$0.02 per share, on the back of last year when the company paid a total of AU$0.04 to shareholders. Based on the last year's worth of payments, CPT Global stock has a trailing yield of around 9.0% on the current share price of A$0.445. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for CPT Global

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. That's why it's good to see CPT Global paying out a modest 46% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

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It's positive to see that CPT Global'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 how much of its profit CPT Global paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see CPT Global has grown its earnings rapidly, up 40% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, CPT Global has lifted its dividend by approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because CPT Global is keeping back more of its profits to grow the business.

Final Takeaway

Is CPT Global an attractive dividend stock, or better left on the shelf? CPT Global has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

In light of that, while CPT Global has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 4 warning signs for CPT Global that you should be aware of before investing in their shares.

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 (at) simplywallst.com.