GrafTech International's (NYSE:EAF) Dividend Will Be $0.01

GrafTech International Ltd.'s (NYSE:EAF) investors are due to receive a payment of $0.01 per share on 30th of June. This payment means the dividend yield will be 1.0%, which is below the average for the industry.

Check out our latest analysis for GrafTech International

GrafTech International's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, GrafTech International was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 31.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 3.7%, which is comfortable for the company to continue in the future.

GrafTech International's Dividend Has Lacked Consistency

It's comforting to see that GrafTech International has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $0.34 in 2018 to the most recent total annual payment of $0.04. The dividend has fallen 88% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been crawling upwards at 2.7% per year. If GrafTech International is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On GrafTech International's Dividend

Overall, we think GrafTech International is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for GrafTech International that investors need to be conscious of moving forward. Is GrafTech International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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