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Lennox International Inc. (NYSE:LII) has announced that it will be increasing its dividend on the 15th of July to US$1.06, which will be 15% higher than last year. The announced payment will take the dividend yield to 1.8%, which is in line with the average for the industry.
Lennox International's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Lennox International's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 14.6%. 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.
Lennox International Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.72 in 2012, and the most recent fiscal year payment was US$3.68. This means that it has been growing its distributions at 18% per annum over that time. 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
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Lennox International has been growing its earnings per share at 13% a year over the past five years. Lennox International definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Lennox International that investors need to be conscious of moving forward. 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.