The board of Albemarle Corporation (NYSE:ALB) has announced that it will pay a dividend of $0.40 per share on the 1st of April. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out 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 was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 67.4%. If the dividend continues on this path, the payout ratio could be 7.5% by next year, which we think can be pretty sustainable going forward.
Albemarle Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.96 in 2014 to the most recent total annual payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Albemarle has impressed us by growing EPS at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Albemarle's prospects of growing its dividend payments in the future.
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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Albemarle is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Albemarle you should be aware of, and 1 of them can't be ignored. Is Albemarle 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.
About NYSE:ALB
Albemarle
Develops, manufactures, and markets engineered specialty chemicals worldwide.
Reasonable growth potential and fair value.
