Why you might be interested in Sealed Air Corporation (NYSE:SEE) for its upcoming dividend
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Airline Sealed (NYSE:SEE) is set to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the latest date by which shareholders must be present on the books of the company to be eligible for payment of a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. In other words, investors can buy shares of Sealed Air before March 10 in order to be eligible for the dividend, which will be paid on March 25.
The company’s next dividend payment will be $0.20 per share, and over the past 12 months the company has paid a total of $0.80 per share. Last year’s total dividend payout shows Sealed Air yielding 1.2% on the current stock price of $66.16. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! We need to see if the dividend is covered by earnings and if it increases.
See our latest review for Sealed Air
Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Sealed Air has a low and conservative payout ratio of just 23% of its after-tax income. Still, cash flow is usually more important than earnings in assessing the sustainability of dividends, so we always need to check whether the company has generated enough cash to pay its dividend. The good news is that it has only paid out 23% of its free cash flow over the past year.
It is positive to see the Sealed Air dividend being 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 security before the dividend is reduced.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Luckily for readers, Sealed Air’s earnings per share have grown 17% annually over the past five years. Earnings per share have grown rapidly, and the company is keeping the majority of its profits with the company. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Over the past 10 years, Sealed Air has increased its dividend by about 4.4% per year on average. It’s good to see that earnings and the dividend have improved – although the former has grown much faster than the latter, perhaps because the company has reinvested more of its earnings into growth.
Is Sealed Air an attractive dividend stock, or is it better left on the shelf? Sealed Air has been growing its profits at a rapid pace and has a moderately low payout ratio, implying that it is reinvesting heavily in its business; a perfect combination. Sealed Air looks solid on this overall analysis, and we’d definitely consider looking into it further.
Although it is tempting to invest in Sealed Air just for the dividends, you should always be aware of the risks involved. Every business has risks, and we’ve spotted 1 warning sign for Sealed Air you should know.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. here is a curated list of attractive stocks that are strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.