Commercial Metals (NYSE:CMC) Has Announced A Dividend Of $0.18

Commercial Metals Company's (NYSE:CMC) investors are due to receive a payment of $0.18 per share on 13th of November. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.

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Commercial Metals' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, the company was paying out 96% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 26%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 14%, which is in a comfortable range for us.

See our latest analysis for Commercial Metals

Commercial Metals Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.48 in 2015, and the most recent fiscal year payment was $0.72. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Commercial Metals' EPS has declined at around 20% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Commercial Metals' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Commercial Metals' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 2 warning signs for Commercial Metals that investors should know about before committing capital to this stock. Is Commercial Metals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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