In This Article:
Croda International Plc's (LON:CRDA) dividend will be increasing from last year's payment of the same period to £0.61 on 26th of May. Despite this raise, the dividend yield of 1.7% is only a modest boost to shareholder returns.
Check out our latest analysis for Croda International
Croda International's Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Croda International was paying a whopping 96% as a dividend, but this only made up 23% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to fall by 40.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Croda International Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of £0.631 in 2013 to the most recent total annual payment of £1.08. This means that it has been growing its distributions at 5.5% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Croda International has seen EPS rising for the last five years, at 20% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Croda International (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.