Corteva (NYSE:CTVA) Is Increasing Its Dividend To US$0.14

By
Simply Wall St
Published
July 24, 2021
NYSE:CTVA
Source: Shutterstock

Corteva, Inc. (NYSE:CTVA) will increase its dividend on the 15th of September to US$0.14. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

View our latest analysis for Corteva

Corteva's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Corteva was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 10.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 41%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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NYSE:CTVA Historic Dividend July 24th 2021

Corteva Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from US$0.52 in 2019 to the most recent annual payment of US$0.56. This works out to be a compound annual growth rate (CAGR) of approximately 3.8% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Corteva has impressed us by growing EPS at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Corteva's prospects of growing its dividend payments in the future.

Corteva Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Corteva is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Corteva that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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