November 30, 2021

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We Wouldn’t Be Too Quick To Buy Power Corporation of Canada (TSE:POW) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Power Corporation of Canada (TSE:POW) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 30th of March to receive the dividend, which will be paid on the 1st of May.

Power Corporation of Canada’s next dividend payment will be CA$0.45 per share. Last year, in total, the company distributed CA$1.62 to shareholders. Last year’s total dividend payments show that Power Corporation of Canada has a trailing yield of 8.1% on the current share price of CA$22.17. If you buy this business for its dividend, you should have an idea of whether Power Corporation of Canada’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Power Corporation of Canada

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. Power Corporation of Canada is paying out an acceptable 63% of its profit, a common payout level among most companies.

Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

TSX:POW Historical Dividend Yield March 26th 2020

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we’re not overly excited about Power Corporation of Canada’s flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Power Corporation of Canada has increased its dividend at approximately 4.4% a year on average.

To Sum It Up

Has Power Corporation of Canada got what it takes to maintain its dividend payments? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you’re still considering Power Corporation of Canada as an investment, you’ll find it beneficial to know what risks this stock is facing. In terms of investment risks, we’ve identified 1 warning sign with Power Corporation of Canada and understanding them should be part of your investment process.

If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at [email protected] 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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