Avient's (NYSE:AVNT) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Avient Corporation (NYSE:AVNT) has announced that it will be increasing its dividend by 4.2% on the 6th of January to $0.2475, up from last year's comparable payment of $0.238. This makes the dividend yield about the same as the industry average at 2.9%.

Our analysis indicates that AVNT is potentially undervalued!

Avient's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Avient's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 39.7%. If the dividend continues along recent trends, we estimate the payout ratio could be 64%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Avient Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from $0.16 total annually to $0.95. This means that it has been growing its distributions at 19% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Avient's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Avient has grown earnings per share at 5.4% per year over the past five years. Avient definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Avient's Dividend

Overall, a dividend increase is always good, and we think that Avient is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Avient that investors need to be conscious of moving forward. Is Avient 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.