Tredegar Corporation (NYSE:TG) Will Pay A US$0.12 Dividend In Four Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tredegar Corporation (NYSE:TG) is about to go ex-dividend in just four days. You will need to purchase shares before the 10th of December to receive the dividend, which will be paid on the 18th of December.

Tredegar's upcoming dividend is US$0.12 a share, following on from the last 12 months, when the company distributed a total of US$0.48 per share to shareholders. Calculating the last year's worth of payments shows that Tredegar has a trailing yield of 2.1% on the current share price of $22.53. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Tredegar has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Tredegar

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Tredegar's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 23% of its free cash flow last year.

Click here to see how much of its profit Tredegar paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Tredegar reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tredegar has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Get our latest analysis on Tredegar's balance sheet health here.

To Sum It Up

Should investors buy Tredegar for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Tredegar is facing. For example - Tredegar has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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