Crown Castle International Corp. (REIT) (NYSE:CCI) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 12th of September will not receive this dividend, which will be paid on the 30th of September.
Crown Castle International (REIT)'s upcoming dividend is US$1.13 a share, following on from the last 12 months, when the company distributed a total of US$4.50 per share to shareholders. Based on the last year's worth of payments, Crown Castle International (REIT) stock has a trailing yield of around 3.1% on the current share price of $146.44. 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 Crown Castle International (REIT) can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Crown Castle International (REIT) paid out 75% of its earnings to investors last year, a normal payout level for most businesses. That said, REITs are often required by law to distribute all of their earnings, and it's not unusual to see a REIT with a payout ratio around 100%. We wouldn't read too much into this. A useful secondary check can be to evaluate whether Crown Castle International (REIT) generated enough free cash flow to afford its dividend. It paid out an unsustainably high 305% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Crown Castle International (REIT) intends to continue funding this dividend, or if it could be forced to the payment.
While Crown Castle International (REIT)'s dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Crown Castle International (REIT) to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Crown Castle International (REIT) has grown its earnings rapidly, up 63% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Crown Castle International (REIT) has delivered an average of 21% per year annual increase in its dividend, based on the past 6 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Has Crown Castle International (REIT) got what it takes to maintain its dividend payments? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Crown Castle International (REIT) paid out a much higher percentage of its free cash flow, which makes us uncomfortable. In summary, it's hard to get excited about Crown Castle International (REIT) from a dividend perspective.
Ever wonder what the future holds for Crown Castle International (REIT)? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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