Here's What We Like About CRA International's (NASDAQ:CRAI) Upcoming Dividend

It looks like CRA International, Inc. (NASDAQ:CRAI) is about to go ex-dividend in the next four days. This means that investors who purchase shares on or after the 15th of March will not receive the dividend, which will be paid on the 26th of March.

CRA International's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Calculating the last year's worth of payments shows that CRA International has a trailing yield of 1.5% on the current share price of $70.05. If you buy this business for its dividend, you should have an idea of whether CRA International'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 CRA International

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. CRA International paid out a comfortable 30% of its profit last year. 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. The good news is it paid out just 20% of its free cash flow in the last year.

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.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see CRA International has grown its earnings rapidly, up 30% a year for the past five years. CRA International is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CRA International has delivered 17% dividend growth per year on average over the past four years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is CRA International an attractive dividend stock, or better left on the shelf? We love that CRA International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for CRA International and you should be aware of them before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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