Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Canadian Natural Resources Limited (TSE:CNQ) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Canadian Natural Resources' shares before the 13th of September in order to be eligible for the dividend, which will be paid on the 4th of October.
The company's next dividend payment will be CA$0.525 per share. Last year, in total, the company distributed CA$2.10 to shareholders. Based on the last year's worth of payments, Canadian Natural Resources stock has a trailing yield of around 4.7% on the current share price of CA$45.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Canadian Natural Resources has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Canadian Natural Resources
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Canadian Natural Resources paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Canadian Natural Resources's earnings have been skyrocketing, up 28% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Canadian Natural Resources has delivered 18% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Should investors buy Canadian Natural Resources for the upcoming dividend? Canadian Natural Resources's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Canadian Natural Resources, and we would prioritise taking a closer look at it.
Wondering what the future holds for Canadian Natural Resources? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.