U.S. Markets closed
  • S&P 500

    4,173.85
    +61.35 (+1.49%)
     
  • Dow 30

    34,382.13
    +360.68 (+1.06%)
     
  • Nasdaq

    13,429.98
    +304.99 (+2.32%)
     
  • Russell 2000

    2,224.63
    +53.68 (+2.47%)
     
  • Crude Oil

    65.51
    +1.69 (+2.65%)
     
  • Gold

    1,844.00
    +20.00 (+1.10%)
     
  • Silver

    27.50
    +0.46 (+1.69%)
     
  • EUR/USD

    1.2146
    +0.0062 (+0.5101%)
     
  • 10-Yr Bond

    1.6350
    -0.0330 (-1.98%)
     
  • Vix

    18.81
    -4.32 (-18.68%)
     
  • GBP/USD

    1.4102
    +0.0050 (+0.3582%)
     
  • USD/JPY

    109.3470
    -0.0870 (-0.0795%)
     
  • BTC-USD

    49,985.43
    +387.45 (+0.78%)
     
  • CMC Crypto 200

    1,398.33
    +39.77 (+2.93%)
     
  • FTSE 100

    7,043.61
    +80.28 (+1.15%)
     
  • Nikkei 225

    28,084.47
    +636.46 (+2.32%)
     

It Might Not Be A Great Idea To Buy Owens Corning (NYSE:OC) For Its Next Dividend

  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Owens Corning (NYSE:OC) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 19th of October in order to be eligible for this dividend, which will be paid on the 6th of November.

Owens Corning's next dividend payment will be US$0.24 per share. Last year, in total, the company distributed US$0.96 to shareholders. Last year's total dividend payments show that Owens Corning has a trailing yield of 1.3% on the current share price of $74.78. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Owens Corning has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Owens Corning

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. Owens Corning reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. 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. Luckily it paid out just 16% of its free cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. Owens Corning was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Owens Corning has delivered an average of 6.0% per year annual increase in its dividend, based on the past seven years of dividend payments.

Remember, you can always get a snapshot of Owens Corning's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Should investors buy Owens Corning for the upcoming dividend? It's hard to get used to Owens Corning paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Owens Corning. Be aware that Owens Corning is showing 3 warning signs in our investment analysis, and 1 of those is concerning...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.