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Pactiv Evergreen Inc. (NASDAQ:PTVE) will pay a dividend of $0.10 on the 13th of December. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.
Check out our latest analysis for Pactiv Evergreen
Pactiv Evergreen's Future Dividend Projections Seem Positive
If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though Pactiv Evergreen isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. 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.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, so there isn't too much pressure on the dividend.
Pactiv Evergreen Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. There hasn't been much of a change in the dividend over the last 4 years. Pactiv Evergreen hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Company Could Face Some Challenges Growing The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Pactiv Evergreen has grown earnings per share at 35% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pactiv Evergreen's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Pactiv Evergreen that investors should know about before committing capital to this stock. Is Pactiv Evergreen 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.