Canadian Natural Resources Limited (TSE:CNQ) Passed Our Checks, And It's About To Pay A CA$1.05 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Canadian Natural Resources Limited (TSE:CNQ) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Canadian Natural Resources' shares before the 14th of March to receive the dividend, which will be paid on the 5th of April.

The company's next dividend payment will be CA$1.05 per share. Last year, in total, the company distributed CA$4.00 to shareholders. Based on the last year's worth of payments, Canadian Natural Resources has a trailing yield of 4.3% on the current stock price of CA$96.72. If you buy this business for its dividend, you should have an idea of whether Canadian Natural Resources's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View 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. That's why it's good to see Canadian Natural Resources paying out a modest 49% of its earnings. 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. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Canadian Natural Resources's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

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 29% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Canadian Natural Resources has increased its dividend at approximately 24% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has Canadian Natural Resources got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Canadian Natural Resources paid out less than half its earnings and a bit over half its free cash flow. Canadian Natural Resources looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Canadian Natural Resources has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Canadian Natural Resources you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.