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Albemarle Raises Dividend 23rd Year in a Row

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Albemarle to pay quarterly dividend

On February 23, 2017, Albemarle (ALB) announced a quarterly dividend of $0.32 per share on the company’s outstanding common stock. The company is expected to maintain that rate for the rest of 2017. The dividend is a rise of 5.0% over the previous quarterly dividend of ~$0.31 paid in 2016.

The dividend will be payable to shareholders on April 3, 2017, with March 15, 2017, as the record date. This is Albemarle’s 23rd consecutive year to raise its quarterly dividend.

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Dividend growth

Albemarle’s dividend growth has remained strong over the years. In the past five years, it has grown at a CAGR (compound annual growth rate) of 12.7%, from $0.67 in 2011 to $1.22 in 2016. Its peer FMC (FMC) has grown its dividend at a CAGR of 1.9% for the same period.

Does Albemarle’s free cash flow support dividend growth?

Dividends are usually paid out of free cash flow. So it’s important to know if a company is generating enough free cash flow to sustain its dividend growth. For our analysis, we’ll consider Albemarle’s free cash flow and convert it into free cash flow per share.

In 2011, ALB’s free cash flow per share was $3.24. It has fallen since then. Its free cash flow per share in fiscal 2016 is expected to be $1.17.

ALB’s dividend, with a five-year CAGR of 12.7%, is very high compared to its free cash flow per share. In the long run, that kind of high dividend growth is hard to sustain with a lower free cash flow growth.

You can indirectly hold Albemarle by investing in the PowerShares DWA Basic Materials Momentum ETF (PYZ), which has invested 3.2% in Albemarle. PYZ’s holdings also include Chemours (CC) and NewMarket (NEU) with weights of 5.1% and 3.6%, respectively.

In the next part, we’ll take a look at Albemarle’s current dividend yield and dividend payout.

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