Corning (NYSE:GLW) Will Pay A Larger Dividend Than Last Year At US$0.27
The board of Corning Incorporated (NYSE:GLW) has announced that it will be increasing its dividend on the 30th of March to US$0.27. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.
See our latest analysis for Corning
Corning's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Corning's dividend made up quite a large proportion of earnings but only 51% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Over the next year, EPS is forecast to expand by 73.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.
Corning Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from US$0.20 to US$1.08. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Earnings per share has been sinking by 18% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Our Thoughts On Corning's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Corning that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.
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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.
