How Likely Is a Dividend Cut From Calavo Growers?

This is your daily dividend safety check. Today, we consider Calavo Growers as its earning call is on December 21, 2020 after the bell. Let's look at Calavo Growers CVGW to see if its 1.65% dividend yield is safe, judging by its earnings to dividend payout ratio and history of dividend cuts.

Calavo Growers's Payout Ratio

Payout ratio is an important measure of dividend affordability. It's equal to dividends per share divided by earnings per share. Calavo Growers has a relatively high payout ratio of 157.53%. When a company's payout ratio is near (or above) 100%, that means a company's earnings are insufficient to cover its dividend and that it may need to eventually borrow money or cut the dividend to stay solvent.

Has Calavo Growers Cut Its Dividend in the Recent Past?

For the most part, it is difficult to predict future behavior based on past activities, but companies with a recent history of dividend cuts are more likely than others to cut them again. If a company does not have a history of consistent or rising dividends, they have less incentive to appease income investors than companies that do. Calavo Growers has not cut its dividend in the last few years, implying its management is reluctant to do so. While there is no guarantee of dividend safety, this is indicative of reliable dividend actions.

How Safe Is Calavo Growers's Dividend Overall?

Calavo Growers has failed one of our dividend safety tests. It has a high payout ratio and no recent case of dividend cut. With all of this in mind, it is quite unlikely that Calavo Growers will cut its dividend next quarter.

Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.