Yahoo Finance Valvoline (NYSE:VVV) Is Paying Out A Dividend Of $0.125
Valvoline Inc. (NYSE:VVV) will pay a dividend of $0.125 on the 15th of December. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.
Check out our latest analysis for Valvoline
Valvoline Doesn't Earn Enough To Cover Its Payments
If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, Valvoline was paying out 82% of earnings, but a comparatively small 57% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
If the company can't turn things around, EPS could fall by 15.9% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 114%, which is definitely a bit high to be sustainable going forward.
Valvoline Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 6 years was $0.196 in 2016, and the most recent fiscal year payment was $0.50. This means that it has been growing its distributions at 17% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Valvoline's EPS has declined at around 16% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Our Thoughts On Valvoline's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Valvoline is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Valvoline has 4 warning signs (and 1 which is potentially serious) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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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