There's A Lot To Like About CSP's (NASDAQ:CSPI) Upcoming US$0.04 Dividend

It looks like CSP Inc. (NASDAQ:CSPI) is about to go ex-dividend in the next four 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase CSP's shares on or after the 22nd of August will not receive the dividend, which will be paid on the 12th of September.

The company's next dividend payment will be US$0.04 per share, and in the last 12 months, the company paid a total of US$0.16 per share. Last year's total dividend payments show that CSP has a trailing yield of 1.1% on the current share price of $14.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether CSP can afford its dividend, and if the dividend could grow.

View our latest analysis for CSP

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CSP has a low and conservative payout ratio of just 12% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution.

Click here to see how much of its profit CSP paid out over the last 12 months.

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, CSP's earnings per share have been growing at 13% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CSP has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is CSP worth buying for its dividend? We like that CSP has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks CSP is facing. For instance, we've identified 3 warning signs for CSP (1 is a bit concerning) you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.