Praxair to pay 4Q17 dividend
On October 26, 2017, Praxair (PX) announced the dates for its 4Q17 regular cash dividend and stated it would pay a dividend of $0.7875 per share. The dividend will be paid on December 15, 2017, to shareholders of record as of December 7, 2017.
Praxair is one of those rare companies that has raised its dividend annually. PX has consecutively increased its annual dividends for the past 24 years. The 4Q17 dividend implies a dividend increase of 5% on a year-over-year basis. Since 2012, inclusive of fiscal 2017, Praxair’s dividend has grown at a CAGR (compound annual growth rate) of 7.4%.
Free cash flows
It’s important for investors to know if a company is generating enough free cash flow to pay its dividend, as dividends are usually financed by free cash flows. At the end of 3Q17, PX reported a free cash flow of ~$1.2 billion. To understand the growth of free cash flows, we’ll convert the free cash flows generated by Praxair into free cash flows per share. From 2012 to 2016, PX’s free cash flow per share has risen at a CAGR of ~24.5%. That indicates that the free cash flow per share has increased at a higher pace than the dividend growth, suggesting that PX’s free cash flow can easily support its dividend growth.
Investors can gain exposure to Praxair by investing in the Vanguard Materials ETF (VAW), which has 4.7% of its total portfolio in Praxair. The fund also gives exposure to DowDuPont (DWDP), Monsanto (MON), and LyondellBasell (LYB) with weights of 17.9%, 5.6%, and 3.9%, respectively, as of November 27, 2017.