Ferroglobe PLC's (NASDAQ:GSM) investors are due to receive a payment of $0.014 per share on 26th of June. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.

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Ferroglobe Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Even in the absence of profits, Ferroglobe is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Over the next year, EPS is forecast to expand by 97.3%. This is the right direction to be moving, but it is not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

View our latest analysis for Ferroglobe

Ferroglobe's Dividend Has Lacked Consistency

Looking back, Ferroglobe's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.056. The dividend has fallen 83% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Company Could Face Some Challenges Growing The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see that Ferroglobe has been growing its earnings per share at 45% a year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

Ferroglobe's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Ferroglobe has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Ferroglobe stock. 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.