Albemarle (NYSE:ALB) Is Due To Pay A Dividend Of $0.405

The board of Albemarle Corporation (NYSE:ALB) has announced that it will pay a dividend on the 2nd of January, with investors receiving $0.405 per share. Based on this payment, the dividend yield will be 1.7%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Albemarle's stock price has increased by 44% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Albemarle's Long-term Dividend Outlook appears Promising

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Despite not generating a profit, Albemarle is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 6.8%, which makes us pretty comfortable with the sustainability of the dividend.

See our latest analysis for Albemarle

Albemarle Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.16 in 2015, and the most recent fiscal year payment was $1.62. This means that it has been growing its distributions at 3.4% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Albemarle's earnings per share has shrunk at 18% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Albemarle's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Albemarle that investors need to be conscious of moving forward. 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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