Read This Before Considering Columbia Sportswear Company (NASDAQ:COLM) For Its Upcoming US$0.30 Dividend

Columbia Sportswear Company (NASDAQ:COLM) stock is about to trade ex-dividend in 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. Therefore, if you purchase Columbia Sportswear’s shares on or after the 20th of November, you won’t be eligible to receive the dividend, when it is paid on the 4th of December.

The company’s next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Calculating the last year’s worth of payments shows that Columbia Sportswear has a trailing yield of 2.2% on the current share price of US$53.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Columbia Sportswear’s payout ratio is modest, at just 36% of profit. 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. Thankfully its dividend payments took up just 39% of the free cash flow it generated, which is a comfortable payout ratio.

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.

Check out our latest analysis for Columbia Sportswear

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

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re discomforted by Columbia Sportswear’s 6.6% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Columbia Sportswear has lifted its dividend by approximately 7.2% a year on average.

Is Columbia Sportswear an attractive dividend stock, or better left on the shelf? Columbia Sportswear has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re not all that optimistic on its dividend prospects.

On that note, you’ll want to research what risks Columbia Sportswear is facing. Case in point: We’ve spotted 1 warning sign for Columbia Sportswear you should be aware of.

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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.