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Interested In Croda International's (LON:CRDA) Upcoming UK£0.43 Dividend? You Have Three Days Left

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·4-min read
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Readers hoping to buy Croda International Plc (LON:CRDA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Croda International's shares before the 9th of September in order to be eligible for the dividend, which will be paid on the 5th of October.

The company's next dividend payment will be UK£0.43 per share, and in the last 12 months, the company paid a total of UK£0.95 per share. Based on the last year's worth of payments, Croda International stock has a trailing yield of around 1.0% on the current share price of £92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Croda International can afford its dividend, and if the dividend could grow.

See our latest analysis for Croda International

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Croda International paid out 52% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Croda International generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Croda International'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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.


Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Croda International earnings per share are up 5.2% per annum over the last five years. Decent historical earnings per share growth suggests Croda International has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Croda International has lifted its dividend by approximately 9.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Croda International? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Croda International's dividend merits.

If you want to look further into Croda International, it's worth knowing the risks this business faces. Our analysis shows 4 warning signs for Croda International and you should be aware of them before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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