Corning Incorporated’s (NYSE:GLW) board of directors announced a dividend of $0.28 per share to be paid on September 27th. This means the annual payout is 2.5% of the current share price, above the industry average.
While dividend yields are important for income investors, it’s also important to consider the wide fluctuations in the stock price, as these typically outweigh the gains from dividends. Investors will be pleased to see that Corning’s stock price has risen 45% over the past three months, which is good for shareholders and may explain the decline in the dividend yield.
View our latest analysis for Corning
Corning’s profits easily cover its dividend
A large dividend yield over the years is meaningless if it’s not sustainable. Prior to this announcement, the company was paying out 155% of its earnings. Without growing earnings and cash flow, it will be difficult for the company to sustain this dividend at this level.
Analysts expect EPS to grow several times over next year. Assuming dividends continue along recent trends, the payout ratio could reach 56%, which is within the company’s comfortable range.
Historical Dividend
Corning has a proven track record
The company has a consistent track record of paying dividends with little fluctuation. Since 2014, the most recent annualized payment was $1.12, up from $0.40 at the time. This means there has been an 11% annual dividend increase over this period. In other words, the dividend has been growing pretty rapidly, and what’s even more impressive is that there hasn’t been a notable decrease during this period.
Dividend growth potential is limited
Based on the dividend history, some investors will be eager to buy the company’s shares. Things may not be as good as they appear on the surface, so don’t jump to conclusions. Earnings per share have fallen 23% over the past five years. From a dividend perspective, a sharp decline in earnings per share is not good. Even a conservative dividend payout ratio could come under pressure if earnings fall substantially. But things are actually looking up next year, with earnings expected to grow. I’d wait until it becomes a pattern before getting too excited.
Corning’s dividend doesn’t seem sustainable
Overall, I don’t think this company is a low dividend stock, even though the dividend wasn’t cut this year. The dividend has been stable in the past, but I feel it is paying too much in the long term. I’ll probably look elsewhere for a profitable investment.
The story continues
Investors generally tend to favor companies with a consistent and stable dividend policy over those with an erratic one. However, there are other things investors should consider when analysing a stock’s price movement. For example, we’ve identified 4 warning signs for Corning (1 is a bit unpleasant!) that you should be aware of before investing. If you’re a dividend investor, you might also want to check out our curated list of high dividend stocks.
Have something to say about this article? Do you have any questions about the content? Contact us directly or email us at editorial-team (at) simplywallst.com.
This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
Have something to say about this article? If you have any questions about the content, please contact us directly or email us at editorial-team@simplywallst.com.
