Some investors rely on dividends to increase their wealth, and if you are one of those dividend detectors, you might be intrigued to know that Corning Incorporated (NYSE: GLW) is set to go ex-dividend in just four days. The ex-dividend date is one business day before the registration date, which is the deadline for shareholders to be on the books of the company to be eligible for a dividend payment. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. Therefore, if you buy Corning shares on or after May 27, you will not be eligible to receive the dividend, when it is paid on June 29.
The company’s next dividend payment will be $ 0.24 per share, following last year when the company paid a total of $ 0.96 to shareholders. Last year’s total dividend payouts show Corning has a trailing yield of 2.2% on the current share price of $ 43.53. Dividends contribute significantly to the return on investments for long-term holders, but only if the dividend continues to be paid. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
Check out our latest review for Corning
Dividends are usually paid out of company income, so if a company pays more than it earned, its dividend is generally at a higher risk of being reduced. Corning paid 62% of its profits to investors last year, a normal payout level for most companies. A useful secondary check may be to assess whether Corning has generated enough free cash flow to pay its dividend. Over the past year, it has paid out 51% of its free cash flow as dividends, which is within the range typical of most companies.
It is positive to see that Corning’s dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher. margin of safety before the dividend is reduced.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits decline and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. With that in mind, we are encouraged by Corning’s steady growth, with earnings per share up 7.4% on average over the past five years. Decent historic growth in earnings per share suggests that Corning has indeed increased shareholder value. However, it now pays more than half of its profits as dividends. If management further increases the payout ratio, we will take this as an unspoken signal that the company’s growth prospects are slowing.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Since our data began 10 years ago, Corning has increased its dividend by about 17% per year on average. It’s encouraging to see the company increasing its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
The bottom line
Should investors buy Corning for the upcoming dividend? Earnings per share grew modestly, and Corning paid just over half of its earnings and free cash flow last year. All things considered, we’re not particularly excited about Corning from a dividend standpoint.
However, if you are still interested in Corning as a potential investment, you should definitely consider some of the risks associated with Corning. For example, we found 3 warning signs for Corning which we recommend that you consider before investing in the business.
If you are looking for dividend paying stocks, we recommend that you take a look at our list of top dividend paying stocks with a yield above 2% and a dividend coming soon.
If you want to trade Corning, open an account with the cheapest platform * approved by professionals, Interactive brokers. Their clients from more than 200 countries and territories trade stocks, options, futures, currencies, bonds and funds around the world from a single integrated account.
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative information. Simply Wall St does not have any position in the mentioned stocks.
*Interactive Brokers ranked Least Expensive Broker by StockBrokers.com Annual Online Review 2020
Do you have any comments on this article? Concerned about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.