Should You Buy Carriage Services, Inc. (NYSE:CSV) For Its Upcoming Dividend?
It looks like Carriage Services, Inc. (NYSE:CSV) is about to go ex-dividend in the next 4 days. 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Carriage Services' shares before the 5th of May to receive the dividend, which will be paid on the 1st of June.
The company's upcoming dividend is US$0.11 a share, following on from the last 12 months, when the company distributed a total of US$0.45 per share to shareholders. Based on the last year's worth of payments, Carriage Services stock has a trailing yield of around 1.6% on the current share price of $28.71. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Carriage Services can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Carriage Services
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Carriage Services is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 19% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Carriage Services earnings per share are up 4.2% per annum over the last five years. Carriage Services is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Carriage Services has delivered an average of 16% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Carriage Services? Earnings per share have been growing moderately, and Carriage Services is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Carriage Services is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Carriage Services has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Carriage Services that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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