Corning Incorporated's (NYSE:GLW) dividend will be increasing from last year's payment of the same period to $0.28 on 28th of September. This takes the dividend yield to 3.5%, which shareholders will be pleased with.
Corning's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 47% which is fairly sustainable.
Corning Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.36 in 2013 to the most recent total annual payment of $1.12. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth Could Be Constrained
Investors could be attracted to the stock based on the quality of its payment history. Corning has impressed us by growing EPS at 19% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
Corning's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Corning's payments are rock solid. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 5 warning signs for Corning (of which 1 is potentially serious!) you should know about. Is Corning not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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