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Readers hoping to buy C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 11th of December will not receive the dividend, which will be paid on the 4th of January.
C.H. Robinson Worldwide's next dividend payment will be US$0.51 per share, and in the last 12 months, the company paid a total of US$2.04 per share. Based on the last year's worth of payments, C.H. Robinson Worldwide stock has a trailing yield of around 2.2% on the current share price of $92.93. If you buy this business for its dividend, you should have an idea of whether C.H. Robinson Worldwide's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for C.H. Robinson Worldwide
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. C.H. Robinson Worldwide paid out 60% of its earnings to investors last year, a normal payout level for most businesses. 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. Dividends consumed 57% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that C.H. Robinson Worldwide'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?
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. With that in mind, we're encouraged by the steady growth at C.H. Robinson Worldwide, with earnings per share up 2.0% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.