Graphic Packaging Holding (NYSE:GPK) Is Paying Out A Dividend Of $0.10

Graphic Packaging Holding Company (NYSE:GPK) has announced that it will pay a dividend of $0.10 per share on the 5th of July. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Graphic Packaging Holding

Graphic Packaging Holding's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. But before making this announcement, Graphic Packaging Holding's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise by 39.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

Graphic Packaging Holding Is Still Building Its Track Record

Graphic Packaging Holding's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 9 years was $0.20 in 2015, and the most recent fiscal year payment was $0.40. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. Graphic Packaging Holding has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

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. It's encouraging to see that Graphic Packaging Holding has been growing its earnings per share at 22% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Graphic Packaging Holding's Dividend

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 dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for Graphic Packaging Holding (1 can't be ignored!) that you should be aware of before investing. 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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