C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 3rd of September in order to be eligible for this dividend, which will be paid on the 30th of September.

C.H. Robinson Worldwide's upcoming dividend is US$0.51 a share, following on from the last 12 months, when the company distributed a total of US$2.04 per share to shareholders. Based on the last year's worth of payments, C.H. Robinson Worldwide stock has a trailing yield of around 2.1% on the current share price of $98.73. If you buy this business for its dividend, you should have an idea of whether C.H. Robinson Worldwide's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for C.H. Robinson Worldwide

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. C.H. Robinson Worldwide paid out 59% of its earnings to investors last year, a normal payout level for most businesses. 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. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 C.H. Robinson Worldwide earnings per share are up 2.4% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. C.H. Robinson Worldwide has delivered an average of 7.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid C.H. Robinson Worldwide? Earnings per share growth has been modest and C.H. Robinson Worldwide paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in C.H. Robinson Worldwide for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for C.H. Robinson Worldwide you should know about.

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.

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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