Avient Corporation (NYSE:AVNT) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of January to $0.27. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.
View our latest analysis for Avient
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Avient's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 73.7% over the next year. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.32 in 2014, and the most recent fiscal year payment was $1.08. This means that it has been growing its distributions at 13% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Avient has been growing its earnings per share at 13% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Avient you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.