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Graphic Packaging Holding's (NYSE:GPK) Dividend Will Be $0.10

Graphic Packaging Holding Company (NYSE:GPK) has announced that it will pay a dividend of $0.10 per share on the 5th of July. This means the annual payment will be 1.4% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Graphic Packaging Holding

Graphic Packaging Holding's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. But before making this announcement, Graphic Packaging Holding's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 83% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

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The next year is set to see EPS grow by 39.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Graphic Packaging Holding Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was $0.20 in 2015, and the most recent fiscal year payment was $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. Graphic Packaging Holding has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Graphic Packaging Holding has grown earnings per share at 22% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Graphic Packaging Holding's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Graphic Packaging Holding's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Graphic Packaging Holding has been making. We don't think Graphic Packaging Holding is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Graphic Packaging Holding (of which 1 makes us a bit uncomfortable!) you should know about. Is Graphic Packaging Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.