Pactiv Evergreen (NASDAQ:PTVE) Is Paying Out A Dividend Of $0.10

The board of Pactiv Evergreen Inc. (NASDAQ:PTVE) has announced that it will pay a dividend of $0.10 per share on the 24th of March. The dividend yield will be 4.0% based on this payment which is still above the industry average.

See our latest analysis for Pactiv Evergreen

Pactiv Evergreen's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Pactiv Evergreen's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 35.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 35%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Pactiv Evergreen Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The most recent annual payment of $0.40 is about the same as the annual payment 2 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Pactiv Evergreen's EPS has fallen by approximately 28% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Pactiv Evergreen's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pactiv Evergreen's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Pactiv Evergreen has 4 warning signs (and 2 which are a bit concerning) we think you should know about. Is Pactiv Evergreen not quite the opportunity you were looking for? Why not check out our selection of top 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.