Carrier Global Corporation (NYSE:CARR) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Carrier Global's shares before the 28th of October in order to receive the dividend, which the company will pay on the 22nd of November.
The company's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Calculating the last year's worth of payments shows that Carrier Global has a trailing yield of 0.9% on the current share price of $54.66. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Carrier Global is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Carrier Global generated enough free cash flow to afford its dividend. It paid out 23% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Carrier Global'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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 we're optimistic about Carrier Global's earnings, which have ripped higher, up 93% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far. Carrier Global looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.
Unfortunately Carrier Global has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Should investors buy Carrier Global for the upcoming dividend? Carrier Global 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. Carrier Global looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Carrier Global looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 3 warning signs we've spotted with Carrier Global (including 1 which is a bit concerning).
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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