Corus Entertainment Inc (TSE:CJR.B) Investors are scheduled to receive a payment of CA$0.06 per share on December 29th. The dividend yield based on that payment will be 10.0%, which is still above the industry average.
While dividend yield is important to income investors, it’s also important to consider large stock price movements, as these generally outweigh any dividend gains. Corus Entertainment’s share price has fallen 37% over the past 3 months, which isn’t ideal for investors and may explain a sharp increase in dividend yield.
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Corus Entertainment’s distributions can be difficult to sustain
A high dividend yield for a few years doesn’t mean much if it can’t be sustained. Corus Entertainment isn’t turning a profit, but its free cash flows easily cover the dividend and leave plenty for reinvestment in the company. We generally think that cash flow is more important than earnings metrics, so we’re pretty happy with the dividend at this level.
Assuming that the trend of the last few years continues, EPS will grow by 10.9% over the next 12 months. We’re happy to see the company moving toward profitability, but that probably won’t be enough to post positive net income this year. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.
The company’s dividend history has been one of instability, with at least one cut in the past 10 years. The annual payment for the last 10 years was CA$0.96 in 2012 and the most recent payment for the financial year was CA$0.24. Dividend payments have fallen sharply, down 75% during that time. Declining dividends aren’t generally what we’re looking for, as they can indicate the company is facing some challenges.
The company could face some challenges in growing its dividend
With a relatively unstable dividend and a weak history of shrinking dividends, it’s even more important to see if earnings per share are growing. We’re heartened to see that Corus Entertainment has grown earnings per share at an annual rate of 11% over the past five years. It’s not great that the company isn’t turning a profit, but decent growth over the past few years is certainly a positive sign. All is not lost, but the future of the dividend definitely depends on the company’s ability to become profitable soon.
Our thoughts on Corus Entertainment’s dividend
In summary, while it’s good to see that the dividend hasn’t been cut, we’re a bit cautious about Corus Entertainment’s payments as there could be some issues sustaining them going forward. The company makes a lot of money, which could sustain the dividend for a while, but the track record hasn’t been great. We’d be cautious about relying on this stock primarily for dividend income.
Companies with stable dividend policies are likely to attract more investor interest than those suffering from more inconsistent practices. At the same time, there are other factors our readers should consider before investing in a stock. For example, we picked out 1 warning sign for Corus Entertainment investors should consider. If you’re a dividend investor, you should also check out ours Curated list of high-yielding dividend stocks.
The assessment is complex, but we help to simplify it.
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