Q: Good Evening
Many analysts are downgrading CPX and some indicate that the pay out ratio is 109% putting the dividend in jeopardy.
I will appreciate your insight going forward.
Is the dividend safe, is it a hold or sell ?
Thanks as always for your comments.
Many analysts are downgrading CPX and some indicate that the pay out ratio is 109% putting the dividend in jeopardy.
I will appreciate your insight going forward.
Is the dividend safe, is it a hold or sell ?
Thanks as always for your comments.
5i Research Answer:
In its January corporate presentation, CPX is targetting 6% dividend growth over the next two years. It could be wrong of course, but it has stated in writing that is a goal, so it would be a big contradiction to cut the dividend. On a 12-month cash flow basis, operating cash flow was $846M, and dividends paid were $303M. There is a cushion, and the 109% is likely referencing earnings, not cash flow. But cash is what is needed to pay dividends. Earnings have many accounting charges that do not impact cash (such as depreciation). We do not like using the word 'safe' for dividends, as no dividend is guaranteed. But we would not expect a cut, and see CPX as a HOLD today. The stock could potential do better as rate pressure eases.