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Mativ Holdings, Inc.'s (NYSE:MATV) investors are due to receive a payment of $0.10 per share on 28th of March. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Mativ Holdings' stock price has reduced by 42% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
See our latest analysis for Mativ Holdings
Mativ Holdings' Long-term Dividend Outlook appears Promising
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Mativ Holdings is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 4.9%, which makes us pretty comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from $1.44 total annually to $0.40. The dividend has fallen 72% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been sinking by 67% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Mativ Holdings is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Mativ Holdings you should be aware of, and 1 of them doesn't sit too well with us. Is Mativ Holdings 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.