Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Core-Mark Holding Company, Inc. (NASDAQ:CORE) is about to go ex-dividend in just 3 days. You can purchase shares before the 13th of March in order to receive the dividend, which the company will pay on the 27th of March.
Core-Mark Holding Company's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Based on the last year's worth of payments, Core-Mark Holding Company has a trailing yield of 1.8% on the current stock price of $27.07. 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! So we need to investigate whether Core-Mark Holding Company can afford its dividend, and if the dividend could grow.
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. That's why it's good to see Core-Mark Holding Company paying out a modest 36% of its earnings. 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. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Core-Mark Holding Company'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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Core-Mark Holding Company earnings per share are up 6.4% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Core-Mark Holding Company has delivered 14% dividend growth per year on average over the past eight years. 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.
Is Core-Mark Holding Company worth buying for its dividend? Earnings per share have been growing moderately, and Core-Mark Holding Company 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Core-Mark Holding Company is halfway there. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Core-Mark Holding Company has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Core-Mark Holding Company and understanding them 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.
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