Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CNA Financial Corporation (NYSE:CNA) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 7th of November to receive the dividend, which will be paid on the 2nd of December.
CNA Financial's next dividend payment will be US$0.3 per share. Last year, in total, the company distributed US$3.4 to shareholders. Based on the last year's worth of payments, CNA Financial has a trailing yield of 7.6% on the current stock price of $44.9. 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 CNA Financial can afford its dividend, and if the dividend could grow.
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. CNA Financial is paying out an acceptable 59% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by CNA Financial's 6.9% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CNA Financial has delivered an average of 27% per year annual increase in its dividend, based on the past nine years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
Has CNA Financial got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Curious what other investors think of CNA Financial? See what analysts 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.
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