ABB (VTX:ABBN) Is Paying Out A Larger Dividend Than Last Year
The board of ABB Ltd (VTX:ABBN) has announced that it will be paying its dividend of $0.87 on the 27th of March, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.
View our latest analysis for ABB
ABB's Earnings Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by ABB's earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 15.6% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.
ABB Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.687 in 2014 to the most recent total annual payment of $0.98. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. ABB has impressed us by growing EPS at 25% per year over the past five years. ABB is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
ABB Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that ABB is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 1 warning sign for ABB that investors should know about before committing capital to this stock. Is ABB not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
