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Owens Corning (NYSE:OC) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 7th of January will not receive the dividend, which will be paid on the 22nd of January.
Owens Corning's next dividend payment will be US$0.26 per share. Last year, in total, the company distributed US$0.96 to shareholders. Last year's total dividend payments show that Owens Corning has a trailing yield of 1.4% on the current share price of $75.76. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Owens Corning has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Owens Corning
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Owens Corning lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Owens Corning didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 12% of its free cash flow in the last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Owens Corning was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past seven years, Owens Corning has increased its dividend at approximately 7.2% a year on average.
We update our analysis on Owens Corning every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Has Owens Corning got what it takes to maintain its dividend payments? It's hard to get used to Owens Corning paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.