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Carrier Global Corporation (NYSE:CARR) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 22nd of December to receive the dividend, which will be paid on the 10th of February.
Carrier Global's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.32 per share. Based on the last year's worth of payments, Carrier Global has a trailing yield of 1.2% on the current stock price of $38.7. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Carrier Global
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Carrier Global has a low and conservative payout ratio of just 9.0% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 3.1% of its free cash flow last year.
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 that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time.
Given that Carrier Global has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Should investors buy Carrier Global for the upcoming dividend? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Carrier Global is halfway there. It's a promising combination that should mark this company worthy of closer attention.