Graphic Packaging Holding (NYSE:GPK) Has Announced That It Will Be Increasing Its Dividend To $0.10
Graphic Packaging Holding Company's (NYSE:GPK) dividend will be increasing from last year's payment of the same period to $0.10 on 5th of January. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.
See our latest analysis for Graphic Packaging Holding
Graphic Packaging Holding's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Graphic Packaging Holding was paying a whopping 111% as a dividend, but this only made up 23% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
The next year is set to see EPS grow by 102.0%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.
Graphic Packaging Holding Is Still Building Its Track Record
Graphic Packaging Holding's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 8 years was $0.20 in 2014, and the most recent fiscal year payment was $0.40. This means that it has been growing its distributions at 9.1% per annum over that time. Graphic Packaging Holding has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Graphic Packaging Holding has grown earnings per share at 21% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Our Thoughts On Graphic Packaging Holding's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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 example, we've identified 3 warning signs for Graphic Packaging Holding (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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