Alcoa (NYSE:AA) Will Pay A Dividend Of $0.10
Alcoa Corporation (NYSE:AA) will pay a dividend of $0.10 on the 18th of November. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.
View our latest analysis for Alcoa
Alcoa's Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While Alcoa is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, so there isn't too much pressure on the dividend.
Alcoa Doesn't Have A Long Payment History
Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Company Could Face Some Challenges Growing The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Alcoa has impressed us by growing EPS at 19% per year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 10 analysts we track are forecasting for Alcoa for free with public analyst estimates for the company. Is Alcoa not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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