Dividend Investors: Don't Be Too Quick To Buy Stingray Group Inc. (TSE:RAY) For Its Upcoming Dividend

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 Stingray Group Inc. (TSE:RAY) is about to go ex-dividend in just three days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Stingray Group's shares on or after the 31st of August will not receive the dividend, which will be paid on the 15th of September.

The company's next dividend payment will be CA$0.085 per share. Last year, in total, the company distributed CA$0.34 to shareholders. Last year's total dividend payments show that Stingray Group has a trailing yield of 2.2% on the current share price of CA$15.40. 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 Stingray Group has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Stingray Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Stingray Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

View our latest analysis for Stingray Group

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Stingray Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Stingray Group has lifted its dividend by approximately 3.4% a year on average.

We update our analysis on Stingray Group every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Stingray Group for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Stingray Group is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Stingray Group and want to know more, you'll find it very useful to know what risks this stock faces. We've identified 2 warning signs with Stingray Group (at least 1 which is concerning), and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.