If you are interested in cashing in on CRA International, Inc.'s (NASDAQ:CRAI) upcoming dividend of US$0.20 per share, you only have 3 days left to buy the shares before its ex-dividend date, 24 May 2019, in time for dividends payable on the 14 June 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding CRA International can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
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5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does CRA International fit our criteria?
The current trailing twelve-month payout ratio for the stock is 27%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Unfortunately, it is really too early to view CRA International as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, CRA International generates a yield of 2.0%, which is high for Professional Services stocks but still below the market's top dividend payers.
Now you know to keep in mind the reason why investors should be careful investing in CRA International for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I've put together three essential factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CRAI’s future growth? Take a look at our free research report of analyst consensus for CRAI’s outlook.
- Valuation: What is CRAI worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CRAI is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.