Corteva, Inc. (NYSE:CTVA) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Corteva, Inc. (NYSE:CTVA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Corteva's shares before the 2nd of December to receive the dividend, which will be paid on the 16th of December.

The company's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.68 to shareholders. Last year's total dividend payments show that Corteva has a trailing yield of 1.1% on the current share price of US$62.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Corteva

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Corteva paid out 69% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Corteva generated enough free cash flow to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Corteva has grown its earnings rapidly, up 21% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Corteva could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, five years ago, Corteva has lifted its dividend by approximately 5.5% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Has Corteva got what it takes to maintain its dividend payments? We like Corteva's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Corteva looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Corteva has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Corteva has 2 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.