Ball Corporation (NYSE:BALL) will pay a dividend of $0.20 on the 15th of September. This means the annual payment will be 1.1% of the current stock price, which is lower than the industry average.

View our latest analysis for Ball

Ball's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Ball was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 34.4% over the next year. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Ball Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.14 in 2012 to the most recent total annual payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Ball has impressed us by growing EPS at 21% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Ball's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ball's payments, as there could be some issues with sustaining them into the future. While Ball is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Ball that investors should know about before committing capital to this stock. Is Ball not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.