W. R. Grace & Co. (NYSE:GRA) Will Pay A US$0.30 Dividend In 4 Days
Readers hoping to buy W. R. Grace & Co. (NYSE:GRA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 24th of February to receive the dividend, which will be paid on the 17th of March.
W. R. Grace's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Last year's total dividend payments show that W. R. Grace has a trailing yield of 1.9% on the current share price of $62.6. 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 W. R. Grace can afford its dividend, and if the dividend could grow.
Check out our latest analysis for W. R. Grace
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. W. R. Grace paid out 57% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 W. R. Grace earnings per share are up 4.0% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. W. R. Grace has delivered 15% dividend growth per year on average over the past four years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is W. R. Grace an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, W. R. Grace's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy W. R. Grace today.
Ever wonder what the future holds for W. R. Grace? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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