Is It Smart To Buy Avient Corporation (NYSE:AVNT) Before It Goes Ex-Dividend?
Readers hoping to buy Avient Corporation (NYSE:AVNT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Avient's shares before the 17th of June in order to be eligible for the dividend, which will be paid on the 8th of July.
The company's upcoming dividend is US$0.21 a share, following on from the last 12 months, when the company distributed a total of US$0.85 per share to shareholders. Calculating the last year's worth of payments shows that Avient has a trailing yield of 1.7% on the current share price of $51.17. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Avient
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Avient paying out a modest 43% of its earnings. A useful secondary check can be to evaluate whether Avient generated enough free cash flow to afford its dividend. Fortunately, it paid out only 45% of its free cash flow in the past year.
It's positive to see that Avient's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Avient, with earnings per share up 2.9% on average over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Avient has lifted its dividend by approximately 18% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Avient for the upcoming dividend? Earnings per share growth has been growing somewhat, and Avient is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Avient is halfway there. Overall we think this is an attractive combination and worthy of further research.
In light of that, while Avient has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Avient is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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