C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, C.H. Robinson Worldwide investors that purchase the stock on or after the 1st of December will not receive the dividend, which will be paid on the 3rd of January.
The company's next dividend payment will be US$0.61 per share, and in the last 12 months, the company paid a total of US$2.20 per share. Looking at the last 12 months of distributions, C.H. Robinson Worldwide has a trailing yield of approximately 2.2% on its current stock price of $98.76. 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.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately C.H. Robinson Worldwide's payout ratio is modest, at just 26% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that C.H. Robinson Worldwide'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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see C.H. Robinson Worldwide has grown its earnings rapidly, up 20% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. C.H. Robinson Worldwide has delivered 5.2% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because C.H. Robinson Worldwide is keeping back more of its profits to grow the business.
The Bottom Line
Is C.H. Robinson Worldwide an attractive dividend stock, or better left on the shelf? We love that C.H. Robinson Worldwide is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for C.H. Robinson Worldwide (1 is a bit unpleasant!) that deserve your attention before investing in the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
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