looks like City of London Investment Group Plc (LON:CLIG) is going ex-dividend within the next 3 days. The ex-dividend date is typically set one business day before the record date. The record date is the deadline by which you must be listed on the company's books as a shareholder in order to receive dividends. It is important to be aware of the ex-dividend date, as stock trades must be settled on or before the record date. This means you must purchase City of London Investment Group shares by February 29th to receive the dividend, which will be paid on March 28th.
The company's next dividend will be GBP 0.11 per share. Last year, the company distributed a total of GBP 0.33 to shareholders. Based on last year's worth of dividends, City of London Investment Group has a yield of 9.6% on the current share price of £3.45. Dividends are an important source of income for many shareholders, but the health of the business is critical to maintaining dividends. That's why we should always check whether the dividend payments are sustainable, and if the company is growing.
Check out our latest analysis for City of London Investment Group.
Dividends are typically paid out of company profits, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. City of London Investment Group paid out 109% of its profit to shareholders as dividends last year, suggesting that the dividend was not fully covered by profits.
Generally, the higher the dividend payout ratio, the higher the risk of a dividend cut.
Click here to see the company's payout ratio and analyst estimates of its future dividends.
Are profits and dividends growing?
Companies whose profits are shrinking are difficult to view from a dividend perspective. If profits decline significantly, the company may be forced to cut its dividend. With that in mind, we find it distasteful to see that City of London Investment Group's earnings have declined by 5.2% per annum over the past five years. After all, as earnings per share decline, the size of the pie that can pay dividends shrinks.
Another important way to measure a company's dividend prospects is by measuring its historical dividend growth rate. City of London Investment Group has delivered an average dividend growth of 3.2% per year over the past 10 years. This is interesting, but combining a dividend increase despite a decline in profits can usually only be achieved by paying out a higher percentage of profits. City of London Investment Group is already paying out 109% of its profit, and with earnings shrinking, we think this dividend is unlikely to grow quickly in the future.
conclusion
Should investors buy or avoid City of London Investment Group from a dividend perspective? Not only are earnings per share shrinking, but City of London – Investment Group pays out a surprisingly high percentage of its profits as dividends. Generally speaking, we think dividend investors should avoid businesses in these situations, as high payout ratios and declining profits can lead to dividends being cut. City of London Investment Group doesn't seem to be doing very well and I wouldn't risk holding it for its dividend.
That said, even if you're considering this stock without worrying too much about its dividend, you should be familiar with the risks associated with City of London Investment Group. For example, I found that: 1 warning sign for City of London Investment Group We recommend that you consider this before investing in your business.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
