Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Crown Crafts, Inc. (NASDAQ: CRWS) is set to trade ex-dividend within the next 4 days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. As a result, Crown Crafts investors who buy the shares on or after June 10 will not receive the dividend, which will be paid on July 2.
The company’s upcoming dividend is US $ 0.08 per share, continuing the past 12 months when the company distributed a total of US $ 0.57 per share to shareholders. Based on last year’s payouts, Crown Crafts shares are yielding approximately 4.0% on the current share price of $ 7.98. Dividends are an important source of income for many shareholders, but the health of the business is critical to sustaining those dividends. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
See our latest review for Crown Crafts
Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. Crown Crafts paid a comfortable 33% of its profit last year. Still, cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. It distributed 29% of its free cash flow in the form of dividends, a comfortable level of distribution for most companies.
It is positive to see that Crown Crafts’ dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin. security before the dividend is cut.
Click here to see how much of its profits Crown Crafts has paid in the past 12 months.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. That’s why it’s a relief to see Crown Crafts’ earnings per share grow 5.1% per year over the past five years. Management reinvested more than half of the company’s profits back into the business, and the company was able to increase its profits with this retained capital. Organizations that reinvest heavily in themselves typically get stronger over time, which can bring compelling benefits like higher profits and dividends.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Crown Crafts has seen dividend growth of 15% per year on average over the past 10 years. It’s encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
The bottom line
From a dividend perspective, should investors buy or avoid Crown Crafts? Earnings per share have grown moderately and Crown Crafts is paying less than half of its earnings and cash flow as dividends, which is an interesting combination because it suggests the company is investing in growth. It might be nice to see profits rise faster, but Crown Crafts is careful with its dividend payouts and could still perform reasonably well over the long term. It is a promising combination that should mark this company worthy of further attention.
So while Crown Crafts looks good from a dividend standpoint, it’s still worth being aware of the risks involved in this title. Every business has risks, and we have spotted 3 warning signs for Crown Crafts (1 of which should not be ignored!) that you should know.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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