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Quad/Graphics, Inc. (NYSE:QUAD) will increase its dividend on the 14th of March to $0.075, which is 50% higher than last year's payment from the same period of $0.05. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.
See our latest analysis for Quad/Graphics
Quad/Graphics' Future Dividend Projections Seem Positive
A big dividend yield for a few years doesn't mean much if it can't be sustained. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.
Looking forward, earnings per share is forecast to rise by 165.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from $1.20 total annually to $0.20. Dividend payments have fallen sharply, down 83% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Quad/Graphics Could Grow Its Dividend
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Quad/Graphics has been growing its earnings per share at 6.1% a year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.
Quad/Graphics' Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Quad/Graphics' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Quad/Graphics that you should be aware of before investing. Is Quad/Graphics 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.