Westlake (NYSE:WLK) Will Pay A Larger Dividend Than Last Year At $0.53

Westlake Corporation (NYSE:WLK) will increase its dividend on the 4th of September to $0.53, which is 1.0% higher than last year's payment from the same period of $0.525. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.

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Westlake's Long-term Dividend Outlook appears Promising

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Westlake is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, so there isn't too much pressure on the dividend.

See our latest analysis for Westlake

Westlake Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.66 in 2015 to the most recent total annual payment of $2.10. This means that it has been growing its distributions at 12% per annum over that time. 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 Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 13% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Westlake's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Westlake that you should be aware of before investing. Is Westlake 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.