Lindsay Corporation's (NYSE:LNN) periodic dividend will be increasing on the 29th of August to $0.37, with investors receiving 2.8% more than last year's $0.36. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.
Lindsay's Future Dividend Projections Appear Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Lindsay's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 12.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Lindsay
Lindsay Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was $1.08, compared to the most recent full-year payment of $1.44. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
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. Lindsay has impressed us by growing EPS at 24% 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 Lindsay's Dividend
Overall, a dividend increase is always good, and we think that Lindsay is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 3 Lindsay analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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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.