Glatfelter Corporation (NYSE:GLT) will pay a dividend of US$0.14 on the 1st of May. The dividend yield will be 4.1% based on this payment which is still above the industry average.
Glatfelter Is Paying Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Glatfelter's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
EPS is forecast to rise very quickly over the next 12 months. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 104%, which is unsustainable.
Glatfelter Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from US$0.36 in 2012 to the most recent annual payment of US$0.56. This means that it has been growing its distributions at 4.5% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Glatfelter's Dividend Might Lack Growth
Investors could be attracted to the stock based on the quality of its payment history. Glatfelter has impressed us by growing EPS at 18% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.
Our Thoughts On Glatfelter's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Glatfelter's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. Case in point: We've spotted 5 warning signs for Glatfelter (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.