Mativ Holdings (NYSE:MATV) Is Paying Out Less In Dividends Than Last Year

Mativ Holdings, Inc.'s (NYSE:MATV) dividend is being reduced from last year's payment covering the same period to $0.10 on the 15th of December. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Mativ Holdings

Mativ Holdings Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Mativ Holdings is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

The next 12 months is set to see EPS grow by 107.3%. If the dividend continues on its recent course, the payout ratio in 12 months could be 178%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.20 in 2013 to the most recent total annual payment of $0.40. Dividend payments have fallen sharply, down 67% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Mativ Holdings' earnings per share has shrunk at 41% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Mativ Holdings you should be aware of, and 1 of them makes us a bit uncomfortable. Is Mativ Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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