On February 9, 2017, Huntsman (HUN) announced a dividend of $0.125 per share for 1Q17 on the company’s outstanding common stock. The dividend will be payable on March 31 to shareholders of record as of March 15, 2017.
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HUN has been paying a stable dividend for several years, but since 2011, Huntsman has increased its dividend only once, representing a CAGR (compound annual growth rate) of 4.6% during that period.
With the assumption that HUN will continue to maintain the dividend it declared in 1Q17 for the remaining quarters of 2017, HUN’s projected that its dividend for fiscal 2017 would be $0.50—the same as in the previous year.
It’s important for investors to know whether the company is generating enough free cash flow to sustain its dividend growth, as dividends are usually paid out of free cash flows. For our analysis and understanding purposes, we’ll consider the free cash flow generated by Huntsman and convert it into free cash flow per share.
Huntsman’s free cash flow has been very unstable, but overall, since 2011, its free cash flow per share has grown at a CAGR of 82.8% until the end of 2016. In 2015, HUN’s free cash flow turned negative, but despite the inconsistent cash flow, this key element of the company’s financials still appears strong enough to support its dividend growth.
Notably, investors can indirectly hold Huntsman by investing in the First Trust Materials AlphaDEX Fund ETF (FXZ), which had 2.3% of its portfolio in HUN on March 16, 2017.
In the next part of this series, we’ll look into Huntsman’s dividend yield.