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Readers hoping to buy Avient Corporation (NYSE:AVNT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Avient's shares on or after the 14th of September, you won't be eligible to receive the dividend, when it is paid on the 6th of October.
The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$0.99 per share to shareholders. Based on the last year's worth of payments, Avient has a trailing yield of 2.6% on the current stock price of $37.63. If you buy this business for its dividend, you should have an idea of whether Avient's dividend is reliable and sustainable. So we need to investigate whether Avient can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Avient
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Avient paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Avient didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Avient was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Avient has increased its dividend at approximately 17% a year on average.