Loblaw Companies' (TSE:L) Dividend Will Be Increased To CA$0.36

By
Simply Wall St
Published
December 13, 2021
TSX:L
Source: Shutterstock

The board of Loblaw Companies Limited (TSE:L) has announced that it will be increasing its dividend on the 30th of December to CA$0.36. This makes the dividend yield about the same as the industry average at 1.4%.

See our latest analysis for Loblaw Companies

Loblaw Companies' Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Loblaw Companies' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 2.3% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

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TSX:L Historic Dividend December 13th 2021

Loblaw Companies Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was CA$0.84, compared to the most recent full-year payment of CA$1.46. This implies that the company grew its distributions at a yearly rate of about 5.7% 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

Investors could be attracted to the stock based on the quality of its payment history. Loblaw Companies has impressed us by growing EPS at 16% per 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 Loblaw Companies' Dividend

Overall, a dividend increase is always good, and we think that Loblaw Companies is a strong income stock thanks to its track record and growing earnings. 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. 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 Loblaw Companies that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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