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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Sealed Air Corporation (NYSE:SEE) is about to go ex-dividend in just four days. Investors can purchase shares before the 3rd of September in order to be eligible for this dividend, which will be paid on the 18th of September.
Sealed Air's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.64 per share. Looking at the last 12 months of distributions, Sealed Air has a trailing yield of approximately 1.6% on its current stock price of $40.88. If you buy this business for its dividend, you should have an idea of whether Sealed Air's dividend is reliable and sustainable. So we need to investigate whether Sealed Air can afford its dividend, and if the dividend could grow.
View our latest analysis for Sealed Air
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sealed Air has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether Sealed Air generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 27% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Sealed Air'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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Sealed Air's earnings per share have been growing at 17% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.