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Readers hoping to buy ChampionX Corporation (NASDAQ:CHX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase ChampionX's shares before the 5th of October in order to receive the dividend, which the company will pay on the 27th of October.
The company's next dividend payment will be US$0.085 per share, on the back of last year when the company paid a total of US$0.34 to shareholders. Based on the last year's worth of payments, ChampionX has a trailing yield of 1.0% on the current stock price of $35.62. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for ChampionX
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately ChampionX's payout ratio is modest, at just 25% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 13% of its free cash flow last year.
It's positive to see that ChampionX's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that ChampionX's earnings are down 2.1% a year over the past five years.
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, two years ago, ChampionX has lifted its dividend by approximately 6.5% a year on average.