The board of Dole plc (NYSE:DOLE) has announced that it will be paying its dividend of $0.085 on the 7th of July, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.
Dole's Payment Could Potentially Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Dole's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 11.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.
See our latest analysis for Dole
Dole Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was $0.32 in 2022, and the most recent fiscal year payment was $0.34. This means that it has been growing its distributions at 2.0% per annum over that time. Dole hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Dole has impressed us by growing EPS at 62% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like Dole's 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.
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. For example, we've picked out 2 warning signs for Dole that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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