Don't Buy The Carlyle Group Inc. (NASDAQ:CG) For Its Next Dividend Without Doing These Checks
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Carlyle Group Inc. (NASDAQ:CG) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 12th of February, you won't be eligible to receive this dividend, when it is paid on the 23rd of February.
Carlyle Group's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Calculating the last year's worth of payments shows that Carlyle Group has a trailing yield of 2.7% on the current share price of $36.6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Carlyle Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Carlyle Group paid out 101% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Carlyle Group paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Carlyle Group earnings per share are up 5.8% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past eight years, Carlyle Group has increased its dividend at approximately 5.7% a year on average. 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.
To Sum It Up
Should investors buy Carlyle Group for the upcoming dividend? Carlyle Group has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. Carlyle Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Although, if you're still interested in Carlyle Group and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 4 warning signs for Carlyle Group (of which 1 is concerning!) you should know about.
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.
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.
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