ABB (VTX:ABBN) Is Paying Out A Larger Dividend Than Last Year

The board of ABB Ltd (VTX:ABBN) has announced that it will be paying its dividend of $0.87 on the 27th of March, an increased payment from last year's comparable dividend. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

View our latest analysis for ABB

ABB's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, ABB was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 15.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

ABB Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.687, compared to the most recent full-year payment of $0.984. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that ABB has grown earnings per share at 25% per year over the past five years. ABB is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

ABB Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that ABB 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for ABB that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.