Carriage Services, Inc. (NYSE:CSV) Pays A US$0.10 Dividend In Just Three Days

Carriage Services, Inc. (NYSE:CSV) stock is about to trade ex-dividend in three days. Investors can purchase shares before the 5th of February in order to be eligible for this dividend, which will be paid on the 1st of March.

Carriage Services's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.35 per share. Based on the last year's worth of payments, Carriage Services stock has a trailing yield of around 1.2% on the current share price of $33.12. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Carriage Services can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Carriage Services

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Carriage Services is paying out an acceptable 54% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Carriage Services generated enough free cash flow to afford its dividend. It paid out 9.2% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Carriage Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Carriage Services's earnings per share have fallen at approximately 7.2% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Carriage Services has increased its dividend at approximately 15% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Should investors buy Carriage Services for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. To summarise, Carriage Services looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on Carriage Services, you'll find it worthwhile knowing the risks that this stock faces. For instance, we've identified 3 warning signs for Carriage Services (1 can't be ignored) you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top 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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