Empire (TSE:EMP.A) Is Increasing Its Dividend To CA$0.15

The board of Empire Company Limited (TSE:EMP.A) has announced that it will be increasing its dividend on the 30th of July to CA$0.15. This makes the dividend yield about the same as the industry average at 1.4%.

See our latest analysis for Empire

Empire's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Empire was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 79.3% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

Empire Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from CA$0.27 in 2011 to the most recent annual payment of CA$0.60. This means that it has been growing its distributions at 8.4% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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 Empire has been growing its earnings per share at 79% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Empire Looks Like A Great Dividend Stock

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 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Empire that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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