Columbia Sportswear Company (NASDAQ:COLM) Looks Like A Good Stock, And It’s Going Ex-Dividend Soon

Readers hoping to buy Columbia Sportswear Company (NASDAQ:COLM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. This means that investors who purchase Columbia Sportswear’s shares on or after the 15th of August will not receive the dividend, which will be paid on the 29th of August.

The company’s next dividend payment will be US$0.30 per share. Last year, in total, the company distributed US$1.20 to shareholders. Last year’s total dividend payments show that Columbia Sportswear has a trailing yield of 1.5% on the current share price of US$80.52. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to investigate whether Columbia Sportswear can afford its dividend, and if the dividend could grow.

See our latest analysis for Columbia Sportswear

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Columbia Sportswear paid out a comfortable 32% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What’s good is that dividends were well covered by free cash flow, with the company paying out 11% of its cash flow last year.

It’s positive to see that Columbia Sportswear’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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we’re not overly excited about Columbia Sportswear’s flat earnings over the past five years. We’d take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Columbia Sportswear has delivered an average of 9.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid Columbia Sportswear? The company has barely grown earnings per share over this time, but at least it’s paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Columbia Sportswear is halfway there. It’s a promising combination that should mark this company worthy of closer attention.

So while Columbia Sportswear looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we’ve identified 1 warning sign with Columbia Sportswear and understanding them should be part of your investment process.

Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.

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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.