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 paying its dividend of $0.2475 on the 6th of January, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.0%, providing a nice boost to shareholder returns.

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Avient's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Avient's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 54.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Avient Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.16 in 2012, and the most recent fiscal year payment was $0.99. This means that it has been growing its distributions at 20% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. However, Avient's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Avient's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Avient you should be aware of, and 1 of them is a bit unpleasant. Is Avient not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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