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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Crane NXT, Co. (NYSE:CXT) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. In other words, investors can purchase Crane NXT's shares before the 28th of February in order to be eligible for the dividend, which will be paid on the 12th of March.
The company's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.68 to shareholders. Based on the last year's worth of payments, Crane NXT stock has a trailing yield of around 1.2% on the current share price of US$58.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Crane NXT
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. Crane NXT is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Luckily it paid out just 22% of its free cash flow last year.
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.
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 fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Crane NXT's flat earnings over the past three years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Crane NXT 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.