Yahoo Finance Conagra Brands, Inc. (NYSE:CAG) Is About To Go Ex-Dividend, And It Pays A 4.4% Yield
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Conagra Brands, Inc. (NYSE:CAG) is about to trade ex-dividend in the next 3 days. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Conagra Brands' shares on or after the 29th of April, you won't be eligible to receive the dividend, when it is paid on the 30th of May.
The company's next dividend payment will be US$0.35 per share, and in the last 12 months, the company paid a total of US$1.40 per share. Based on the last year's worth of payments, Conagra Brands has a trailing yield of 4.4% on the current stock price of US$31.57. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Conagra Brands
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. Conagra Brands is paying out an acceptable 69% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Conagra Brands generated enough free cash flow to afford its dividend. It distributed 46% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Conagra Brands'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?
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Conagra Brands's earnings are 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 growth has been slim and the company is paying out more than half 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Conagra Brands has increased its dividend at approximately 3.4% a year on average.
Final Takeaway
Is Conagra Brands worth buying for its dividend? It's unfortunate that earnings per share have not grown, and we'd note that Conagra Brands is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. Overall, it's hard to get excited about Conagra Brands from a dividend perspective.
While it's tempting to invest in Conagra Brands for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 3 warning signs with Conagra Brands and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
