CF Industries Holdings (NYSE:CF) Has Announced A Dividend Of US$0.30 – Simply Wall St

CF Industries Holdings, Inc.'s (NYSE:CF) investors are due to receive a payment of US$0.30 per share on 31st of August. This means the annual payment is 2.5% of the current stock price, which is above the average for the industry.

See our latest analysis for CF Industries Holdings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, CF Industries Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 101.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from US$0.08 to US$1.20. This means that it has been growing its distributions at 31% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. In the last five years, CF Industries Holdings' earnings per share has shrunk at approximately 2.5% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Overall, we think CF Industries Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for CF Industries Holdings you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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This article by Simply Wall St is general in nature. 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. *Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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CF Industries Holdings (NYSE:CF) Has Announced A Dividend Of US$0.30 - Simply Wall St