Church & Dwight Co., Inc. (NYSE:CHD) will increase its dividend on March 1 to $0.26. This brings the annual payout to 1.0% of the current share price, which is unfortunately less than what the industry is paying.
See our latest analysis for Church & Dwight
Church & Dwight revenue easily covers distributions
It would be nice if the yield was higher, but we should also check whether higher levels of dividend payments would be sustainable. However, Church & Dwight’s earnings easily cover the dividend. This means most of his income is kept to grow the business.
Looking ahead, earnings per share are expected to fall 4.9% over the next year. If the dividend holds up on recent trends, we estimate the payout ratio could be 34%, which we consider quite comfortable, with most of the company’s earnings remaining to grow the business going forward. .
Although the company has a long history of dividends, it has been cut at least once in the last 10 years. The first annual payment in the past 10 years was US$0.34 in 2012, and the most recent year’s payment was US$1.05. This equates to a compound annual growth rate (CAGR) of approximately 12% per year during this period. Despite rapid dividend growth over the past few years, we have also seen payouts decline in the past, which makes us cautious.
The dividend should increase
With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate dividend growth in the future. Church & Dwight has impressed us by increasing EPS by 14% per year over the past five years. Church & Dwight definitely has the potential to increase its dividend going forward with earnings on an uptrend and a low payout ratio.
Church & Dwight looks like a big dividend stock
In summary, it is always positive to see the dividend increase, and we are particularly satisfied with its overall sustainability. Distributions are easily covered by earnings and plenty of cash is also generated. If earnings fall over the next 12 months, the dividend could be shaken up a bit, but we don’t think that should cause too much of a problem in the long run. Overall, this checks a lot of the boxes we look for when choosing an income stock.
Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. Meanwhile, despite the importance of dividend payments, these are not the only factors our readers should be aware of when evaluating a company. For example, we chose 2 warning signs for Church & Dwight that investors should consider. If you are a dividend investor, you can also consult our curated list of high performing dividend stocks.
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