"Cineplex agreed to be acquired by Cineworld in mid-December for $34 per share, and the arrangement was overwhelmingly approved by the Canadian theatre giant's shareholders in early February. Cineplex pays an annual dividend of C$1.50 per share, with a dividend yield of 18.69%.
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Why Canada's leading movie exhibitor Cineplex Inc (TSX:CGX) may be better off reinvesting in itself instead of catering to those investors only focused on the stock's current dividend yield. Despite the stock being a dividend-growth darling for years, some investors are becoming nervous about Cineplex’s dividend. CGX's most recent monthly dividend payment was made to shareholders of record on Friday, February 28. Chemtrade Logistics Income Fund pays an annual dividend of C$0.60 per share, with a dividend yield of 11.15%. TSX:CGX Historical Dividend Yield, October 25th 2019 Have Earnings And Dividends Been Growing?
Top. At the time, and in its only formal update on the Cineworld deal since the pandemic began, Cineplex said the deal was still awaiting a green light under the Investment Canada Act, and warned that prolonged closures could hurt its ability to live up to the terms of debt conditions in the takeover agreement.In a note distributed to clients Monday, National Bank Financial analyst Adam Shine said he doesn’t expect Cineplex’s debt to exceed $725 million, a threshold that would breach the agreement's debt terms, if its theatres remain closed throughout May.He added the theatre chain may also be able to stay below that key level through June as long as it keeps a tight lid on spending “while also, importantly, getting reasonable rent relief.”An analyst at JP Morgan, however, is less optimistic. Doubt about the deal's fate is evident in the market, however, with Cineplex's shares down 67.7 per cent year-to-date through the end of trading Monday as they closed at $10.92 apiece.A representative for Cineplex declined to comment on Cineworld’s disclosure when contacted by BNN Bloomberg Tuesday morning.Cineplex shuttered its entire network of theatres and entertainment facilities on March 16.
They say the payout is unsustainable and if the current weakness continues it’s only a matter of time before it’s cut.
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