Rollins' (NYSE:ROL) Upcoming Dividend Will Be Larger Than Last Year's
Rollins, Inc. (NYSE:ROL) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of September to $0.13. This takes the annual payment to 1.3% of the current stock price, which is about average for the industry.
Check out our latest analysis for Rollins
Rollins' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Rollins 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.
The next year is set to see EPS grow by 47.9%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.0948 in 2013 to the most recent total annual payment of $0.52. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Rollins has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Rollins has been growing its earnings per share at 14% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
We Really Like Rollins' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 9 Rollins analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Rollins 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.
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