Corning (NYSE:GLW) Is Paying Out A Larger Dividend Than Last Year

Corning Incorporated (NYSE:GLW) will increase its dividend from last year's comparable payment on the 15th of December to $0.28. This will take the dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

See our latest analysis for Corning

Corning's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 148% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 48%, which is in a comfortable range for us.

Corning Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.36 in 2013, and the most recent fiscal year payment was $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year 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.

Corning Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Corning has been growing its earnings per share at 19% a year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Corning's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Corning will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

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. To that end, Corning has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.