Sylvamo Corporation's (NYSE:SLVM) dividend will be increasing from last year's payment of the same period to $0.60 on 17th of October. Even though the dividend went up, the yield is still quite low at only 2.4%.
See our latest analysis for Sylvamo
Sylvamo's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. However, Sylvamo's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 68.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 53%, which is comfortable for the company to continue in the future.
Sylvamo Is Still Building Its Track Record
It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. However, Sylvamo's EPS was effectively flat over the past three years, which could stop the company from paying more every year.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Sylvamo's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Sylvamo is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Sylvamo has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.