Huntsman (NYSE:HUN) Is Paying Out A Larger Dividend Than Last Year
Huntsman Corporation (NYSE:HUN) has announced that it will be increasing its periodic dividend on the 29th of March to $0.25, which will be 5.3% higher than last year's comparable payment amount of $0.238. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Huntsman
Huntsman Might Find It Hard To Continue The Dividend
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Huntsman is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Looking forward, earnings per share is forecast to fall off a cliff over the next year. This means that the company will be unprofitable and it could face the difficult decision of satisfying income-seeking shareholders or putting additional pressure on its balance sheet.
Huntsman 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 an annual total of $0.50 in 2014 to the most recent total annual payment of $0.95. This means that it has been growing its distributions at 6.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See Huntsman's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Huntsman has seen EPS rising for the last five years, at 8.1% per annum. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Huntsman's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Huntsman that investors need to be conscious of moving forward. Is Huntsman 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.
