How Stable Is Praxair’s Dividend Yield?

Praxair’s dividend yield

A dividend yield is a measure of a company’s annual dividend per share relative to its price per share. It indicates how much cash an investor is getting for every dollar invested in a company’s equity. A high dividend yield is a good sign, as it provides investors with a stable income.
As of March 13, 2017, Praxair’s (PX) stock price closed at $116.72. With PX declaring a 1Q17 quarterly dividend of $0.79 per share, PX’s current dividend yield stands at 2.7%. PX’s peer Air Products and Chemicals (APD) has a current dividend yield of 2.7%.

How Stable Is Praxair’s Dividend Yield?

In the past five years, Praxair’s dividend has remained stable in the range of 1.9% to 2.8%. Praxair’s current dividend yield of 2.7% is higher than the yields on one-year Treasury bills and qualifies as one of the stable dividend-yielding companies.

Dividend payout

Dividend payout can be calculated by dividing annual dividend per share by annual earnings per share (or EPS) and is expressed in percentage. The metric tells an investor what percentage of its earnings the company is paying out as a dividend.

Since 2011, Praxair’s dividend payout has been on the rise from 36.7% in 2011 to 57.6% in 2016. However, the biggest concern for Praxair investors is the declining trend in its earnings per share from $5.87 in 2013 to $5.21 in 2016. If this trend continues, the higher payouts might hurt Praxair’s future growth and expansion.

Investors can indirectly hold Praxair by investing in the iShares U.S. Basic Materials (IYM), which invests 5.6% of its holdings in PX. The top holdings of the fund include Dow Chemical (DOW) and DuPont (DD), which have weights of 12.1% and 11.9%, respectively, as of March 13, 2017.

In the next part, we’ll look into analysts’ latest rating for Praxair.