DuPont de Nemours, Inc. (NYSE:DD) Is About To Go Ex-Dividend, And It Pays A 1.8% Yield

DuPont de Nemours, Inc. (NYSE:DD) stock is about to trade ex-dividend in 4 days. 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase DuPont de Nemours' shares before the 29th of November in order to be eligible for the dividend, which will be paid on the 16th of December.

The company's next dividend payment will be US$0.38 per share. Last year, in total, the company distributed US$1.52 to shareholders. Looking at the last 12 months of distributions, DuPont de Nemours has a trailing yield of approximately 1.8% on its current stock price of US$83.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether DuPont de Nemours has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for DuPont de Nemours

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DuPont de Nemours distributed an unsustainably high 125% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while DuPont de Nemours's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see DuPont de Nemours's earnings have been skyrocketing, up 32% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DuPont de Nemours has seen its dividend decline 8.9% per annum on average over the past 10 years, which is not great to see. DuPont de Nemours is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Should investors buy DuPont de Nemours for the upcoming dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. All things considered, we are not particularly enthused about DuPont de Nemours from a dividend perspective.

If you want to look further into DuPont de Nemours, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 3 warning signs with DuPont de Nemours and understanding them should be part of your investment process.

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.