The Chemours Company (NYSE:CC) stock is about to trade ex-dividend in 4 days. You will need to purchase shares before the 14th of August to receive the dividend, which will be paid on the 15th of September.
Chemours's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Based on the last year's worth of payments, Chemours has a trailing yield of 5.0% on the current stock price of $19.88. If you buy this business for its dividend, you should have an idea of whether Chemours's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Chemours reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Chemours didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.
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 fall far enough, the company could be forced to cut its dividend. Chemours reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last five years, Chemours has lifted its dividend by approximately 53% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
We update our analysis on Chemours every 24 hours, so you can always get the latest insights on its financial health, here.
The Bottom Line
Is Chemours worth buying for its dividend? It's hard to get used to Chemours paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. In summary, it's hard to get excited about Chemours from a dividend perspective.
On that note, you'll want to research what risks Chemours is facing. We've identified 3 warning signs with Chemours (at least 1 which is potentially serious), and understanding these should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.