Is Carnival Corporation a Good Buy for its 4.7% Dividend?

Carnival Corporation & Plc (NYSE:CCL) has fallen more than 20% over the past six months. A couple of disappointing quarters and multiple adjustments to its profit forecast have sent the stock into a tailspin.

Even though the company can in above expectations for its most recent quarter, the problem is that the company isn’t too optimistic because of economic and other challenges that are likely to weigh on its future results.

The danger is that if there is a big downturn, especially in the U.S., that will likely hurt the demand for cruises and could be a problem for Carnival.

For investors, however, the silver lining in all that is that there’s now a lot of pessimism that’s priced into Carnival’s shares. Not only does that help lower the bar for future quarters, but the decline in share price has made the stock a more appealing value buy.

At less than 10 times earnings and slightly above book value, Carnival could be a good buy, especially with its dividend yielding 4.7%.

While there may be concerns of a weaker outlook impacting its ability to pay a dividend, consider that over the past four quarters, Carnival has generated more than $1.1 billion in free cash flow. Over the past two quarters, free cash has come in well above the amount of dividends that the company has paid out.

For dividend investors looking for a good way to diversify their portfolio, Carnival could be an appealing buy, especially with the stock trading just a few dollars away from its 52-week low.