Crown Crafts (NASDAQ:CRWS) Has Announced A Dividend Of US$0.08

Crown Crafts, Inc. (NASDAQ:CRWS) has announced that it will pay a dividend of US$0.08 per share on the 1st of October. Based on this payment, the dividend yield on the company's stock will be 7.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Crown Crafts

Crown Crafts' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Crown Crafts was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 12.1%. If the dividend continues on this path, the payout ratio could be 66% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the first annual payment was US$0.08, compared to the most recent full-year payment of US$0.32. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Crown Crafts May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, Crown Crafts' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 1.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Crown Crafts you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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