CF Industries Holdings, Inc. (NYSE:CF) stock is about to trade ex-dividend in 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase CF Industries Holdings' shares on or after the 15th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be US$0.50 per share, on the back of last year when the company paid a total of US$2.00 to shareholders. Looking at the last 12 months of distributions, CF Industries Holdings has a trailing yield of approximately 2.4% on its current stock price of US$82.41. 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 CF Industries Holdings has been able to grow its dividends, or if the dividend might be cut.

Our free stock report includes 1 warning sign investors should be aware of before investing in CF Industries Holdings. Read for free now.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. CF Industries Holdings paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether CF Industries Holdings generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.

It's positive to see that CF Industries Holdings'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.

Check out our latest analysis for CF Industries Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:CF Historic Dividend May 11th 2025

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see CF Industries Holdings's earnings have been skyrocketing, up 30% per annum for the past five years. CF Industries Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Story Continues

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, CF Industries Holdings has lifted its dividend by approximately 5.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because CF Industries Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy CF Industries Holdings for the upcoming dividend? CF Industries Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

In light of that, while CF Industries Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for CF Industries Holdings and you should be aware of this before buying any shares.

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.

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