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Is It Smart To Buy C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) Before It Goes Ex-Dividend?

Simply Wall St

It looks like C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 5th of September will not receive the dividend, which will be paid on the 30th of September.

C.H. Robinson Worldwide's next dividend payment will be US$0.50 per share, and in the last 12 months, the company paid a total of US$2.00 per share. Based on the last year's worth of payments, C.H. Robinson Worldwide has a trailing yield of 2.4% on the current stock price of $84.49. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for C.H. Robinson Worldwide

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. C.H. Robinson Worldwide paid out a comfortable 39% 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 31% 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:CHRW Historical Dividend Yield, September 1st 2019

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. For this reason, we're glad to see C.H. Robinson Worldwide's earnings per share have risen 14% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, C.H. Robinson Worldwide has increased its dividend at approximately 7.6% 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.

The Bottom Line

Should investors buy C.H. Robinson Worldwide for the upcoming dividend? C.H. Robinson Worldwide has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. C.H. Robinson Worldwide looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Wondering what the future holds for C.H. Robinson Worldwide? See what the 18 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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 editorial-team@simplywallst.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.