Corning Incorporated (NYSE:GLW) has announced that it will pay a dividend of $0.28 per share on the 29th of September. This makes the dividend yield 1.8%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Corning's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Corning's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 80% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 42%, which is in a comfortable range for us.

View our latest analysis for Corning

Corning Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $0.40 total annually to $1.12. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Corning's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Corning has grown earnings per share at 48% per year over the past five years. Although earnings per share is up nicely Corning is paying out 117% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Corning that investors should know about before committing capital to this stock. 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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