Corning Incorporated's (NYSE:GLW) dividend will be increasing from last year's payment of the same period to $0.28 on 29th of June. This will take the dividend yield to an attractive 3.4%, providing a nice boost to shareholder returns.
Corning's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. 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.
Over the next year, EPS is forecast to expand by 153.0%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 45% which would be quite comfortable going to take the dividend forward.
Corning Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.30 in 2013 to the most recent total annual payment of $1.12. This means that it has been growing its distributions at 14% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Corning's Dividend Might Lack Growth
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Corning has been growing its earnings per share at 30% a year over the past five years. While EPS is growing rapidly, Corning paid out a very high 101% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
The Dividend Could Prove To Be Unreliable
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. Overall, we don't think this company has the makings of a good income stock.
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. To that end, Corning has 4 warning signs (and 1 which is a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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