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The board of Adeia Inc. (NASDAQ:ADEA) has announced that it will pay a dividend of $0.05 per share on the 17th of June. Based on this payment, the dividend yield on the company's stock will be 1.5%, which is an attractive boost to shareholder returns.
Adeia's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Adeia's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 2.5%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.
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. The dividend has gone from an annual total of $0.92 in 2015 to the most recent total annual payment of $0.20. The dividend has fallen 78% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend's Growth Prospects Are Limited
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, Adeia's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Adeia has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Adeia's Dividend
Overall, we think Adeia is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Adeia that investors should take into consideration. Is Adeia 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.