Tredegar's (NYSE:TG) Dividend Will Be US$0.12

Tredegar Corporation's (NYSE:TG) investors are due to receive a payment of US$0.12 per share on 1st of October. The dividend yield will be 49% based on this payment which is still above the industry average.

See our latest analysis for Tredegar

Tredegar Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 81% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 6.5% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 1,209%, which is definitely a bit high to be sustainable going forward.

Tredegar Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$0.16 in 2011, and the most recent fiscal year payment was US$0.48. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Tredegar's earnings per share has fallen at approximately 6.5% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Tredegar's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Tredegar that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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