NewMarket Corporation (NYSE:NEU) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of January to $3.00. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.
NewMarket's Future Dividend Projections Appear Well Covered By Earnings
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, NewMarket's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS could expand by 15.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for NewMarket
NewMarket Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $5.60, compared to the most recent full-year payment of $12.00. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that NewMarket has been growing its earnings per share at 16% a year over the past five years. NewMarket definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like NewMarket'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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for NewMarket that investors should take into consideration. Is NewMarket 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.