Pactiv Evergreen (NASDAQ:PTVE) Is Due To Pay A Dividend Of $0.10
Pactiv Evergreen Inc. (NASDAQ:PTVE) has announced that it will pay a dividend of $0.10 per share on the 24th of March. The dividend yield will be 4.0% based on this payment which is still above the industry average.
See our latest analysis for Pactiv Evergreen
Pactiv Evergreen's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Pactiv Evergreen was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 35.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 35%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Pactiv Evergreen Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. There hasn't been much of a change in the dividend over the last 2 years. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Pactiv Evergreen's EPS has declined at around 28% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Pactiv Evergreen you should be aware of, and 2 of them are significant. 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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