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Brunswick Corporation (NYSE:BC) has announced that it will be increasing its dividend on the 15th of March to US$0.36. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.
Brunswick's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Brunswick was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 28.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.
Brunswick Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$0.05 to US$1.46. This works out to be a compound annual growth rate (CAGR) of approximately 40% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Brunswick has been growing its earnings per share at 21% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Brunswick Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Brunswick that investors should know about before committing capital to this stock. Is Brunswick 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.