Is It Smart To Buy Cleanaway Waste Management Limited (ASX:CWY) Before It Goes Ex-Dividend?
It looks like Cleanaway Waste Management Limited (ASX:CWY) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 3rd of March will not receive the dividend, which will be paid on the 3rd of April.
Cleanaway Waste Management's next dividend payment will be AU$0.02 per share. Last year, in total, the company distributed AU$0.04 to shareholders. Last year's total dividend payments show that Cleanaway Waste Management has a trailing yield of 1.7% on the current share price of A$2.31. If you buy this business for its dividend, you should have an idea of whether Cleanaway Waste Management'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.
Check out our latest analysis for Cleanaway Waste Management
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. Cleanaway Waste Management paid out 73% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Cleanaway Waste Management generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 50% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Cleanaway Waste Management'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 the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Cleanaway Waste Management has grown its earnings rapidly, up 51% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Cleanaway Waste Management could have strong prospects for future increases to the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cleanaway Waste Management has delivered an average of 18% per year annual increase in its dividend, based on the past six years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is Cleanaway Waste Management an attractive dividend stock, or better left on the shelf? We like Cleanaway Waste Management's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Cleanaway Waste Management, and we would prioritise taking a closer look at it.
Ever wonder what the future holds for Cleanaway Waste Management? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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 editorial-team@simplywallst.com. 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.
