Graphic Packaging Holding (NYSE:GPK) Has Announced A Dividend Of $0.10

Graphic Packaging Holding Company (NYSE:GPK) will pay a dividend of $0.10 on the 5th of October. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.

See our latest analysis for Graphic Packaging Holding

Graphic Packaging Holding's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Graphic Packaging Holding was paying only paying out a fraction of earnings, but the payment was a massive 667% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 34.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

Graphic Packaging Holding Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.20 in 2014 to the most recent total annual payment of $0.40. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Graphic Packaging Holding has seen EPS rising for the last five years, at 22% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Graphic Packaging Holding's payments, as there could be some issues with sustaining them into the future. While Graphic Packaging Holding is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Graphic Packaging Holding (1 is a bit unpleasant!) that you should be aware of before investing. Is Graphic Packaging Holding 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.