this article goes back to Jan 2016...is the 6.5% dividend safe?? http://seekingalpha.com/article/3828696-collectors-universe-fixed-income-equity
What do you mean by safe? It seems like they have been paying out a dividend every year and will likely continue to do so as long as business goes well. http://m.nasdaq.com/symbol/clct/dividend-history Don't forget to take into account the actual stock price. If that falls (as your linked article mentions), the dividend might not be enough to offset the losses.
You answered your own question..."as long as business goes well." The current pay out ratio is a very high 164%...hence, my original question.
Well it is still there a year later. No dividend is permanently safe and even some of the best have taken hits from time to time but there doesn't seem to be anything indicating that it is about to disappear
Companies tend to protect the dividend. There is a certain class of investor who focuses on stocks who pay dividends for the income. The counterpoint is companies are reluctant to increase the dividend unless they are sure they can continue to pay it going forward (yo-yo is as bad as dcreasing). But, if the business conditions do substantially change, then the dividend will get reduced again to a sustainable value (which might be below the actual amount that the company could afford to pay - as a cushion).
I have their stock too. As far as CLCT it doesn't appear their dividend is going away anytime soon. Next quarter is usually pretty busy with the new mint products that will get graded in massive numbers
That dividend yield certainly caught my eye. Think I will do a bit of research on the company later today. But several of you are right: a dividend cut can crater a stock. I got my fanny kicked earlier this year when Kinder Morgan chopped theirs.
IMO, what throws up a red flag is the current pay out ratio. I was surprised to see it was that high.
I think that's their strategy to attract investors. Even though the price could go up it will never be an Amazon type stock just from the nature of the business but a dividend like that is very attractive to a lot of investors and certainly gets people to at least consider it
I looked it up today. The dividend payout ratio is actually closer to 180 percent, which means they are paying out all their earnings plus an amount equal to 80 percent of their earnings. I'd like to know how they plan to keep doing that, in light of their earnings being flat the last five quarters. It is also a lightly traded stock -- only 22,000 shares. I'd worry that if the dividend was cut or eliminated, sellers would totally overwhelm buyers quickly. That's when breathtaking price moves in the down direction can take place.
This is probably one way they plan to keep it. http://investors.collectors.com/releasedetail.cfm?releaseid=983661
