Imperial Oil (TSE:IMO) Has Announced That It Will Be Increasing Its Dividend To CA$0.72

Imperial Oil Limited (TSE:IMO) has announced that it will be increasing its periodic dividend on the 1st of April to CA$0.72, which will be 20% higher than last year's comparable payment amount of CA$0.60. Even though the dividend went up, the yield is still quite low at only 2.4%.

View our latest analysis for Imperial Oil

Imperial Oil's Projected Earnings Seem Likely To Cover Future Distributions

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, Imperial Oil's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 10.3% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 34%, which is comfortable for the company to continue in the future.

Imperial Oil Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$0.52 in 2015, and the most recent fiscal year payment was CA$2.40. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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. Imperial Oil has impressed us by growing EPS at 27% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Imperial Oil Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Imperial Oil is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Imperial Oil that investors should know about before committing capital to this stock. 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.