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Crown Crafts, Inc. (NASDAQ:CRWS) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Crown Crafts' shares before the 9th of December in order to receive the dividend, which the company will pay on the 31st of December.
The company's upcoming dividend is US$0.43 a share, following on from the last 12 months, when the company distributed a total of US$0.57 per share to shareholders. Looking at the last 12 months of distributions, Crown Crafts has a trailing yield of approximately 8.9% on its current stock price of $7.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Crown Crafts
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. That's why it's good to see Crown Crafts paying out a modest 43% of its earnings. A useful secondary check can be to evaluate whether Crown Crafts generated enough free cash flow to afford its dividend. It paid out 110% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.
While Crown Crafts's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Crown Crafts's ability to maintain its dividend.
Click here to see how much of its profit Crown Crafts paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Crown Crafts's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.