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ADTRAN (NASDAQ:ADTN) Is Due To Pay A Dividend Of US$0.09

ADTRAN, Inc. (NASDAQ:ADTN) will pay a dividend of US$0.09 on the 2nd of June. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

See our latest analysis for ADTRAN

ADTRAN's Distributions May Be Difficult To Sustain

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even in the absence of profits, ADTRAN is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Analysts expect the EPS to grow by 95.6% over the next 12 months. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

historic-dividend
historic-dividend

ADTRAN Has A Solid Track Record

The company has an extended history of paying stable dividends. There hasn't been much of a change in the dividend over the last 10. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 30% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

ADTRAN's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ADTRAN's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for ADTRAN 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.

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.

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