Raven Industries, Inc. (NASDAQ:RAVN) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 10th of October will not receive this dividend, which will be paid on the 25th of October.
Raven Industries's next dividend payment will be US$0.1 per share, on the back of last year when the company paid a total of US$0.5 to shareholders. Calculating the last year's worth of payments shows that Raven Industries has a trailing yield of 1.6% on the current share price of $32.48. If you buy this business for its dividend, you should have an idea of whether Raven Industries's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Raven Industries paid out a comfortable 49% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 44% of its free cash flow in the past 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.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Raven Industries's earnings per share have been shrinking at 2.2% a year over the previous 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 last ten years, Raven Industries has lifted its dividend by approximately 7.2% a year on average.
To Sum It Up
Is Raven Industries an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Raven Industries from a dividend perspective.
Wondering what the future holds for Raven Industries? See what the two 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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