Illinois Tool Works (NYSE:ITW) Has Announced That It Will Be Increasing Its Dividend To $1.40
Illinois Tool Works Inc. (NYSE:ITW) has announced that it will be increasing its periodic dividend on the 12th of October to $1.40, which will be 6.9% higher than last year's comparable payment amount of $1.31. This makes the dividend yield 2.1%, which is above the industry average.
Check out our latest analysis for Illinois Tool Works
Illinois Tool Works' Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Illinois Tool Works was quite comfortably earning enough to cover the dividend. 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 16.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.
Illinois Tool Works Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.52 in 2013, and the most recent fiscal year payment was $5.24. This works out to be a compound annual growth rate (CAGR) of approximately 13% 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
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Illinois Tool Works has grown earnings per share at 13% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Illinois Tool Works Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Illinois Tool Works is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Illinois Tool Works that you should be aware of before investing. Is Illinois Tool Works 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.
