Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Celanese Corporation (NYSE:CE) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Celanese's shares before the 28th of April in order to be eligible for the dividend, which will be paid on the 12th of May.
The company's next dividend payment will be US$0.03 per share, on the back of last year when the company paid a total of US$2.80 to shareholders. Calculating the last year's worth of payments shows that Celanese has a trailing yield of 6.7% on the current share price of US$41.56. If you buy this business for its dividend, you should have an idea of whether Celanese's dividend is reliable and sustainable. As a result, readers should always check whether Celanese has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Celanese paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Dividends consumed 58% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
See our latest analysis for Celanese
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Celanese reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Celanese has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Get our latest analysis on Celanese's balance sheet health here.
To Sum It Up
Is Celanese worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
Although, if you're still interested in Celanese and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 3 warning signs for Celanese (1 makes us a bit uncomfortable) you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.