C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, C.H. Robinson Worldwide investors that purchase the stock on or after the 7th of March will not receive the dividend, which will be paid on the 1st of April.

The company's next dividend payment will be US$0.62 per share, on the back of last year when the company paid a total of US$2.48 to shareholders. Based on the last year's worth of payments, C.H. Robinson Worldwide stock has a trailing yield of around 2.4% on the current share price of US$101.62. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether C.H. Robinson Worldwide has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for C.H. Robinson Worldwide

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. C.H. Robinson Worldwide paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether C.H. Robinson Worldwide generated enough free cash flow to afford its dividend. Over the last year it paid out 68% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that C.H. Robinson Worldwide's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. That explains why we're not overly excited about C.H. Robinson Worldwide's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, C.H. Robinson Worldwide has increased its dividend at approximately 5.9% a year on average.

The Bottom Line

Is C.H. Robinson Worldwide an attractive dividend stock, or better left on the shelf? While earnings per share are flat, at least C.H. Robinson Worldwide has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering C.H. Robinson Worldwide as an investment, you'll find it beneficial to know what risks this stock is facing. In terms of investment risks, we've identified 2 warning signs with C.H. Robinson Worldwide and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking 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.