Yahoo Finance Read This Before Considering The Chemours Company (NYSE:CC) For Its Upcoming US$0.25 Dividend
It looks like The Chemours Company (NYSE:CC) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 14th of August, you won't be eligible to receive this dividend, when it is paid on the 15th of September.
Chemours's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Calculating the last year's worth of payments shows that Chemours has a trailing yield of 5.0% on the current share price of $19.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Chemours has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Chemours
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. Chemours paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 36% of its free cash flow in the past year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Chemours reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chemours has delivered 53% dividend growth per year on average over the past five years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Remember, you can always get a snapshot of Chemours's financial health, by checking our visualisation of its financial health, here.
Final Takeaway
Is Chemours worth buying for its dividend? It's hard to get used to Chemours paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
In light of that, while Chemours has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Chemours is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious...
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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