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 Concurrent Technologies Plc (LON:CNC) is about to go ex-dividend in just 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. Therefore, if you purchase Concurrent Technologies’ shares on or after the 16th of September, you won’t be eligible to receive the dividend, when it is paid on the 1st of October.
The company’s next dividend payment will be UK£0.011 per share, on the back of last year when the company paid a total of UK£0.025 to shareholders. Looking at the last 12 months of distributions, Concurrent Technologies has a trailing yield of approximately 2.6% on its current stock price of £0.985. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Concurrent Technologies has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Concurrent Technologies
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. Concurrent Technologies paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Concurrent Technologies generated enough free cash flow to afford its dividend. Fortunately, it paid out only 40% of its free cash flow in the past year.
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 how much of its profit Concurrent Technologies paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it’s a relief to see Concurrent Technologies earnings per share are up 2.2% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company’s prospects for future growth.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Concurrent Technologies has lifted its dividend by approximately 5.4% 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 Concurrent Technologies for the upcoming dividend? While earnings per share growth has been modest, Concurrent Technologies’s dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we’re not hugely bearish on the stock, but there are likely better dividend investments out there.
So while Concurrent Technologies looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we’ve spotted 1 warning sign for Concurrent Technologies you should know about.
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.
If you’re looking to trade Concurrent Technologies, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.