Yahoo Finance Why It Might Not Make Sense To Buy C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) For Its Upcoming Dividend
C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase C.H. Robinson Worldwide's shares before the 7th of June in order to be eligible for the dividend, which will be paid on the 1st of July.
The company's next dividend payment will be US$0.61 per share. Last year, in total, the company distributed US$2.44 to shareholders. Looking at the last 12 months of distributions, C.H. Robinson Worldwide has a trailing yield of approximately 2.8% on its current stock price of US$86.37. 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. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out 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. Last year C.H. Robinson Worldwide paid out 96% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether C.H. Robinson Worldwide generated enough free cash flow to afford its dividend. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's good to see that while C.H. Robinson Worldwide's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by C.H. Robinson Worldwide's 12% 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, C.H. Robinson Worldwide has lifted its dividend by approximately 5.7% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. C.H. Robinson Worldwide is already paying out 96% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
To Sum It Up
Is C.H. Robinson Worldwide worth buying for its dividend? Earnings per share have been in decline, which is not encouraging. Additionally, C.H. Robinson Worldwide is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. It's not that we think C.H. Robinson Worldwide is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Although, if you're still interested in C.H. Robinson Worldwide and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 3 warning signs for C.H. Robinson Worldwide and you should be aware of these before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
