Lennox International Inc. (NYSE:LII) will increase its dividend from last year's comparable payment on the 15th of July to $1.30. Despite this raise, the dividend yield of 0.9% is only a modest boost to shareholder returns.
Lennox International's Future Dividend Projections Appear Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Lennox International was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 28.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.
View our latest analysis for Lennox International
Lennox International Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.20 in 2015, and the most recent fiscal year payment was $5.20. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Lennox International has been growing its earnings per share at 20% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Lennox International's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Lennox International that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.