Yahoo Finance We Wouldn't Be Too Quick To Buy The Chemours Company (NYSE:CC) Before It Goes Ex-Dividend
It looks like The Chemours Company (NYSE:CC) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 26th of February in order to be eligible for this dividend, which will be paid on the 16th of March.
Chemours's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Based on the last year's worth of payments, Chemours stock has a trailing yield of around 5.1% on the current share price of $19.7. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Chemours has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Chemours
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Chemours paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Chemours didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 97% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Chemours was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chemours has delivered 70% dividend growth per year on average over the past four years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Remember, you can always get a snapshot of Chemours's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
Has Chemours got what it takes to maintain its dividend payments? It's hard to get used to Chemours paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. Bottom line: Chemours has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Wondering what the future holds for Chemours? See what the 11 analysts we track 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
