- Oops!Something went wrong.Please try again later.
Albemarle Corporation's (NYSE:ALB) investors are due to receive a payment of US$0.39 per share on 1st of July. This payment means the dividend yield will be 0.9%, which is below the average for the industry.
Albemarle's Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Albemarle's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
The next year is set to see EPS grow by 12.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.
Albemarle Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from US$0.56 in 2011 to the most recent annual payment of US$1.56. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Albemarle May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. It's not great to see that Albemarle's earnings per share has fallen at approximately 4.2% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Albemarle is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Albemarle that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.