Dividend Investors: Don't Be Too Quick To Buy Glatfelter Corporation (NYSE:GLT) For Its Upcoming Dividend
It looks like Glatfelter Corporation (NYSE:GLT) is about to go ex-dividend in the next 3 days. You can purchase shares before the 31st of December in order to receive the dividend, which the company will pay on the 1st of February.
Glatfelter's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.54 per share. Based on the last year's worth of payments, Glatfelter has a trailing yield of 3.2% on the current stock price of $16.84. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Glatfelter
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Glatfelter's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
Click here to see how much of its profit Glatfelter paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Glatfelter reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Glatfelter has increased its dividend at approximately 4.1% a year on average.
Remember, you can always get a snapshot of Glatfelter's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Is Glatfelter worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: Glatfelter has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
With that in mind though, if the poor dividend characteristics of Glatfelter don't faze you, it's worth being mindful of the risks involved with this business. We've identified 2 warning signs with Glatfelter (at least 1 which makes us a bit uncomfortable), and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming 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.
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