Adeia (NASDAQ:ADEA) Will Pay A Dividend Of $0.05

The board of Adeia Inc. (NASDAQ:ADEA) has announced that it will pay a dividend on the 17th of June, with investors receiving $0.05 per share. The dividend yield will be 1.4% based on this payment which is still above the industry average.

Our free stock report includes 1 warning sign investors should be aware of before investing in Adeia. Read for free now.

Adeia's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Adeia's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 2.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Adeia

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from $0.92 total annually to $0.20. The dividend has fallen 78% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Adeia hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, Adeia has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, a consistent dividend is a good thing, and we think that Adeia has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Adeia that investors should take into consideration. 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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