Imperial Oil (TSE:IMO) Will Pay A Larger Dividend Than Last Year At CA$0.72

The board of Imperial Oil Limited (TSE:IMO) has announced that it will be increasing its dividend by 20% on the 1st of April to CA$0.72, up from last year's comparable payment of CA$0.60. Even though the dividend went up, the yield is still quite low at only 2.5%.

View our latest analysis for Imperial Oil

Imperial Oil's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Imperial Oil's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 10.3% over the next 12 months. 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 implies that the company grew its distributions at a yearly rate of about 17% over that duration. 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. It's encouraging to see that Imperial Oil has been growing its earnings per share at 27% 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.

Imperial Oil 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. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Imperial Oil that you should be aware of before investing. 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.