Today is Thursday, January 16, 2020, and this is your daily dividend safety update. Today we’re looking at Core Laboratories (NYSE: CLB) stock to see whether its 5.48% dividend is safe.
High-yield dividend stocks can be very useful to investors of all ages. Younger investors can use dividend reinvestment plans (DRIPs) to grow their portfolios exponentially over time, while retirees can use them to generate passive income.
In both cases, it’s preferable to buy dividend stocks with steady or rising dividends – and avoid those that cut their dividends.
Let’s look at the payout ratio, cash flow growth, and dividend history of Core Laboratories to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
Core Laboratories has a payout ratio of 97.02%. That’s too high for our liking. Payout ratio equals dividends per share divided by earnings per share. Payout ratios near or over 100% indicate that the company might not be able to afford its dividend — or that it might have to borrow money to pay it.
Cash Flow Growth Year-Over-Year
Core Laboratories has grown its cash flow by 5.05% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
Core Laboratories has a recent history of dividend cuts. In fact, its last cut was earlier this year. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
The Takeaway
Core Laboratories stock has failed 2 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is likely in the next few years.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than Core Laboratories. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.
