Crown Crafts, Inc. (NASDAQ:CRWS) Stock Goes Ex-Dividend In Just Four Days

Crown Crafts, Inc. (NASDAQ:CRWS) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Crown Crafts' shares on or after the 14th of December will not receive the dividend, which will be paid on the 5th of January.

The company's next dividend payment will be US$0.08 per share, and in the last 12 months, the company paid a total of US$0.32 per share. Looking at the last 12 months of distributions, Crown Crafts has a trailing yield of approximately 6.3% on its current stock price of $5.08. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Crown Crafts can afford its dividend, and if the dividend could grow.

See our latest analysis for Crown Crafts

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Crown Crafts is paying out an acceptable 74% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Crown Crafts generated enough free cash flow to afford its dividend. Fortunately, it paid out only 38% of its free cash flow in the past 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 how much of its profit Crown Crafts paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Crown Crafts, with earnings per share up 7.3% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Crown Crafts dividends are largely the same as they were 10 years ago.

Final Takeaway

Is Crown Crafts an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and Crown Crafts paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Crown Crafts's dividend merits.

On that note, you'll want to research what risks Crown Crafts is facing. To help with this, we've discovered 3 warning signs for Crown Crafts that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.