Yahoo Finance Albemarle (NYSE:ALB) Will Pay A Dividend Of $0.40
The board of Albemarle Corporation (NYSE:ALB) has announced that it will pay a dividend of $0.40 per share on the 1st of July. This means the annual payment will be 1.2% of the current stock price, which is lower than the industry average.
See our latest analysis for Albemarle
Albemarle's Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Albemarle's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 11%, which makes us pretty comfortable with the sustainability of the dividend.
Albemarle Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.96, compared to the most recent full-year payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Albemarle's earnings per share has shrunk at 16% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Albemarle's payments, as there could be some issues with sustaining them into the future. While Albemarle is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Albemarle that investors should take into consideration. 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.
