C.H. Robinson Worldwide (NASDAQ:CHRW) Is Increasing Its Dividend To $0.62

C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) will increase its dividend on the 1st of October to $0.62, which is 1.6% higher than last year's payment from the same period of $0.61. This takes the annual payment to 2.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for C.H. Robinson Worldwide

C.H. Robinson Worldwide's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend made up a very large portion of earnings and also represented 92% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 94.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 47% which brings it into quite a comfortable range.

C.H. Robinson Worldwide Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $1.40, compared to the most recent full-year payment of $2.44. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though C.H. Robinson Worldwide's EPS has declined at around 11% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On C.H. Robinson Worldwide's Dividend

In summary, while it's always good to see the dividend being raised, we don't think C.H. Robinson Worldwide's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for C.H. Robinson Worldwide that investors need to be conscious of moving forward. Is C.H. Robinson Worldwide not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.