The board of DuPont de Nemours, Inc. (NYSE:DD) has announced that it will be increasing its dividend by 7.9% on the 17th of March to $0.41, up from last year's comparable payment of $0.38. This makes the dividend yield about the same as the industry average at 1.9%.

Check out our latest analysis for DuPont de Nemours

DuPont de Nemours' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, DuPont de Nemours was paying out 86% of earnings, but a comparatively small 50% 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.

The next year is set to see EPS grow by 162.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 28% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $4.44 in 2015 to the most recent total annual payment of $1.52. The dividend has fallen 66% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

DuPont de Nemours' Dividend Might Lack Growth

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that DuPont de Nemours has grown earnings per share at 41% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which DuPont de Nemours hasn't been doing.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think DuPont de Nemours' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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 DuPont de Nemours that investors need to be conscious of moving forward. Is DuPont de Nemours not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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