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The board of Ball Corporation (NYSE:BALL) has announced that it will pay a dividend of $0.20 per share on the 17th of March. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.
See our latest analysis for Ball
Ball's Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. 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.
The next year is set to see EPS grow by 55.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
Ball Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.26 in 2015, and the most recent fiscal year payment was $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Ball Could Grow Its Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Ball has impressed us by growing EPS at 8.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Ball is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Ball you should be aware of, and 2 of them don't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield 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.