ADTRAN Holdings (NASDAQ:ADTN) Is Paying Out A Dividend Of $0.09

The board of ADTRAN Holdings, Inc. (NASDAQ:ADTN) has announced that it will pay a dividend on the 6th of June, with investors receiving $0.09 per share. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. ADTRAN Holdings' stock price has reduced by 52% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for ADTRAN Holdings

ADTRAN Holdings Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even in the absence of profits, ADTRAN Holdings is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

The next 12 months is set to see EPS grow by 155.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 143% over the next year.

ADTRAN Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. There hasn't been much of a change in the dividend over the last 10 years. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

We Could See ADTRAN Holdings' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that ADTRAN Holdings has been growing its earnings per share at 6.5% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

An additional note is that the company has been raising capital by issuing stock equal to 60% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think ADTRAN Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for ADTRAN Holdings (3 are significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.