Why You Might Be Interested In Crown Crafts, Inc. (NASDAQ:CRWS) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Crown Crafts, Inc. (NASDAQ:CRWS) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 10th of December in order to be eligible for this dividend, which will be paid on the 31st of December.
Crown Crafts's next dividend payment will be US$0.33 per share, and in the last 12 months, the company paid a total of US$0.32 per share. Based on the last year's worth of payments, Crown Crafts stock has a trailing yield of around 4.1% on the current share price of $7.8685. 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 investigate whether Crown Crafts can afford its dividend, and if the dividend could grow.
View our latest analysis for Crown Crafts
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. That's why it's good to see Crown Crafts paying out a modest 33% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 25% of its free cash flow in the past year.
It's positive to see that Crown Crafts's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Crown Crafts paid out over the last 12 months.
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 Crown Crafts earnings per share are up 5.0% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Crown Crafts has lifted its dividend by approximately 15% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Crown Crafts? Earnings per share growth has been growing somewhat, and Crown Crafts is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Crown Crafts is halfway there. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Crown Crafts for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 4 warning signs for Crown Crafts (1 is a bit unpleasant) you should be aware of.
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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