Cabot (NYSE:CBT) Has Announced A Dividend Of $0.37

Simply Wall St
·2 min read

Cabot Corporation (NYSE:CBT) will pay a dividend of $0.37 on the 10th of March. This payment means that the dividend yield will be 2.1%, which is around the industry average.

Check out our latest analysis for Cabot

Cabot's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Cabot was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 123.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Cabot Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.80 in 2013 to the most recent total annual payment of $1.48. This means that it has been growing its distributions at 6.3% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Unfortunately, Cabot's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Cabot's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Cabot is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Cabot has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Cabot not quite the opportunity you were looking for? Why not check out our selection of top 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.

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