Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Core-Mark Holding Company, Inc. (NASDAQ: CORE) is set to trade ex-dividend within the next four days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. This means that investors who buy the shares of Core-Mark Holding Company from May 20 will not receive the dividend, which will be paid on June 25.
The company’s next dividend will be $ 0.13 per share. Last year, in total, the company distributed US $ 0.52 to shareholders. Last year’s total dividend payouts show Core-Mark Holding Company has a trailing yield of 1.2% on the current share price of $ 42.78. Dividends contribute significantly to investment returns for long-term holders, but only if the dividend continues to be paid. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
See our latest analysis for Core-Mark Holding Company
If a company pays more in dividends than it has earned, then the dividend can become unsustainable – hardly an ideal situation. Fortunately, Core-Mark Holding Company’s payout ratio is modest, at just 33% of profits. A useful secondary check may be to assess whether Core-Mark Holding Company has generated enough free cash flow to pay its dividend. The good thing is that dividends were well covered by free cash flow, with the company paying 18% of its cash flow last year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t fall precipitously.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to sell heavily at the same time. That’s why it’s a relief to see Core-Mark Holding Company’s earnings per share grow 6.1% per year over the past five years. Management reinvested more than half of the company’s profits back into the business, and the company was able to increase its profits with this retained capital. We think this is generally an attractive combination, as dividends can increase through a combination of earnings growth and / or a higher payout ratio over time.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Since our data began 10 years ago, Core-Mark Holding Company has increased its dividend by around 12% per year on average. It’s encouraging to see the company increasing its dividends as profits rise, which at least suggests some corporate interest in rewarding shareholders.
The bottom line
Is Core-Mark Holding Company Worth Buying For Its Dividend? Earnings per share growth has increased somewhat, and Core-Mark Holding Company pays less than half of its earnings and cash flow as dividends. This is interesting for several reasons, as it suggests that management may be reinvesting heavily in the company, but it also helps to increase the dividend in time. It might be nice to see profits rise faster, but Core-Mark Holding Company is careful with its dividend payouts and could still perform reasonably well over the long term. Overall, we think this is an engaging combination worthy of further research.
On that note, you’ll want to research the risks Core-Mark Holding Company faces. In terms of investment risks, we have identified 2 warning signs with Core-Mark Holding Company and understanding them should be part of your investment process.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative information. Simply Wall St has no position in the mentioned stocks.
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