Carpenter Technology Corporation (NYSE:CRS) will pay a dividend of US$0.20 on the 7th of September. This means that the annual payment will be 2.5% of the current stock price, which is in line with the average for the industry.
Carpenter Technology Might Find It Hard To Continue The Dividend
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Carpenter Technology is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.
Over the next year, EPS is forecast to rise by 69.2%. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.NYSE:CRS Historic Dividend August 22nd 2021
Carpenter Technology Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was US$0.72 in 2011, and the most recent fiscal year payment was US$0.80. This means that it has been growing its distributions at 1.1% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 29% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Carpenter Technology that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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