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The board of Mativ Holdings, Inc. (NYSE:MATV) has announced that it will pay a dividend of $0.10 per share on the 20th of December. The dividend yield will be 3.0% based on this payment which is still above the industry average.
Check out our latest analysis for Mativ Holdings
Mativ Holdings' Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate Mativ Holdings' Could Struggle to Maintain Dividend Payments In The Future
Mativ Holdings' Future Dividends May Potentially Be At Risk
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. While Mativ Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Over the next year, EPS is forecast to expand by 119.4%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 173%, which probably can't continue without putting some pressure on the balance sheet.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $1.44 in 2014, and the most recent fiscal year payment was $0.40. This works out to a decline of approximately 72% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
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. Mativ Holdings' EPS has fallen by approximately 71% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.
Mativ Holdings' 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. 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 would be a touch cautious of relying on this stock primarily for the dividend income.