Sylvamo (NYSE:SLVM) Will Pay A Dividend Of $0.45

Sylvamo Corporation (NYSE:SLVM) will pay a dividend of $0.45 on the 23rd of January. This payment means that the dividend yield will be 3.7%, which is around the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Sylvamo's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Sylvamo's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 83.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Sylvamo

Sylvamo Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the dividend has gone from $0.45 total annually to $1.80. This means that it has been growing its distributions at 59% per annum over that time. Sylvamo has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Sylvamo has impressed us by growing EPS at 18% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Sylvamo Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Sylvamo might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Sylvamo that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.