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There's A Lot To Like About Cencora's (NYSE:COR) Upcoming US$0.51 Dividend

Readers hoping to buy Cencora, Inc. (NYSE:COR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Cencora's shares on or after the 9th of May, you won't be eligible to receive the dividend, when it is paid on the 24th of May.

The company's next dividend payment will be US$0.51 per share, on the back of last year when the company paid a total of US$2.04 to shareholders. Based on the last year's worth of payments, Cencora stock has a trailing yield of around 0.9% on the current share price of US$223.95. If you buy this business for its dividend, you should have an idea of whether Cencora's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Cencora

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Cencora is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.

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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.

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historic-dividend

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Cencora earnings per share are up 4.1% per annum over the last five years. Cencora is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Cencora has lifted its dividend by approximately 9.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Cencora for the upcoming dividend? Earnings per share have been growing moderately, and Cencora is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Cencora is halfway there. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Cencora has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Cencora that we recommend you consider before investing in the business.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.