Commercial Metals Company (NYSE:CMC) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy Commercial Metals Company (NYSE:CMC) 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. Thus, you can purchase Commercial Metals' shares before the 28th of March in order to receive the dividend, which the company will pay on the 10th of April.
The company's next dividend payment will be US$0.18 per share, on the back of last year when the company paid a total of US$0.64 to shareholders. Based on the last year's worth of payments, Commercial Metals has a trailing yield of 1.1% on the current stock price of US$57.87. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Commercial Metals has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Commercial Metals
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. Commercial Metals paid out just 9.7% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Commercial Metals generated enough free cash flow to afford its dividend. The good news is it paid out just 11% 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?
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Commercial Metals's earnings have been skyrocketing, up 42% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Commercial Metals looks like a promising growth company.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Commercial Metals has lifted its dividend by approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Commercial Metals is keeping back more of its profits to grow the business.
The Bottom Line
Has Commercial Metals got what it takes to maintain its dividend payments? We love that Commercial Metals 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.
While it's tempting to invest in Commercial Metals for the dividends alone, you should always be mindful of the risks involved. For example - Commercial Metals has 2 warning signs we think you should be aware of.
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.
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.
