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Canadian Natural Resources Limited (TSE:CNQ) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that investors that purchase the stock on or after the 12th of September will not receive this dividend, which will be paid on the 1st of October.
Canadian Natural Resources's next dividend payment will be CA$0.38 per share. Last year, in total, the company distributed CA$1.50 to shareholders. Based on the last year's worth of payments, Canadian Natural Resources has a trailing yield of 4.8% on the current stock price of CA$31.51. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Canadian Natural Resources has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Canadian Natural Resources
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. Fortunately Canadian Natural Resources's payout ratio is modest, at just 35% of profit. A useful secondary check can be to evaluate whether Canadian Natural Resources generated enough free cash flow to afford its dividend. It distributed 36% 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Canadian Natural Resources's earnings per share have risen 14% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Canadian Natural Resources has increased its dividend at approximately 22% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.