Why You Might Be Interested In Carter's, Inc. (NYSE:CRI) For Its Upcoming Dividend

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Carter's, Inc. (NYSE:CRI) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Carter's' shares on or after the 25th of November will not receive the dividend, which will be paid on the 6th of December.

The company's next dividend payment will be US$0.80 per share, on the back of last year when the company paid a total of US$3.20 to shareholders. Calculating the last year's worth of payments shows that Carter's has a trailing yield of 6.2% on the current share price of US$52.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Carter's has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Carter's

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Carter's paid out a comfortable 50% of its profit last year. A useful secondary check can be to evaluate whether Carter's generated enough free cash flow to afford its dividend. It distributed 41% 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.

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NYSE:CRI Historic Dividend November 20th 2024

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Carter's's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

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