The board of Ball Corporation (NYSE:BALL) has announced that it will pay a dividend of $0.20 per share on the 17th of September. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders’ returns.
View our latest analysis for Ball
Ball’s Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Ball is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 74.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
Ball Has A Solid Track Record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2014, the dividend has gone from $0.26 total annually to $0.80. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven’t experienced any notable falls during this period.
We Could See Ball’s Dividend Growing
The company’s investors will be pleased to have been receiving dividend income for some time. Ball has impressed us by growing EPS at 8.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Ball’s prospects of growing its dividend payments in the future.
In Summary
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Ball’s payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don’t think this company has the makings of a good income stock.
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. To that end, Ball has 3 warning signs (and 2 which don’t sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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