Crown Crafts' (NASDAQ:CRWS) Dividend Will Be $0.08

Crown Crafts, Inc. (NASDAQ:CRWS) will pay a dividend of $0.08 on the 3rd of July. The dividend yield will be 9.8% based on this payment which is still above the industry average.

Our free stock report includes 5 warning signs investors should be aware of before investing in Crown Crafts. Read for free now.

Estimates Indicate Crown Crafts' Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 136% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 36%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to fall by 17.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 166%, which could put the dividend in jeopardy if the company's earnings don't improve.

See our latest analysis for Crown Crafts

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Crown Crafts' EPS has fallen by approximately 18% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Crown Crafts' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 5 warning signs for Crown Crafts (of which 1 is a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.