Crown Crafts (NASDAQ:CRWS) Will Pay A Dividend Of $0.08

The board of Crown Crafts, Inc. (NASDAQ:CRWS) has announced that it will pay a dividend on the 4th of October, with investors receiving $0.08 per share. This makes the dividend yield 6.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Crown Crafts

Crown Crafts' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Crown Crafts was paying out 78% of earnings, but a comparatively small 41% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 6.7% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 85% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The payments haven't really changed that much since 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

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. In the last five years, Crown Crafts' earnings per share has shrunk at approximately 6.7% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Crown Crafts you should be aware of, and 1 of them is potentially serious. Is Crown Crafts not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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