Ferroglobe (NASDAQ:GSM) Has Announced A Dividend Of $0.014

Ferroglobe PLC (NASDAQ:GSM) will pay a dividend of $0.014 on the 26th of June. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.

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Ferroglobe Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Despite not generating a profit, Ferroglobe is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise by 97.3% over the next year. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Check out our latest analysis for Ferroglobe

Ferroglobe's Dividend Has Lacked Consistency

It's comforting to see that Ferroglobe has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.056. The dividend has fallen 83% 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 Company Could Face Some Challenges Growing The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Ferroglobe has been growing its earnings per share at 45% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ferroglobe's payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Are management backing themselves to deliver performance? Check their shareholdings in Ferroglobe in our latest insider ownership analysis. 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.