ISS (CPH:ISS) Is Increasing Its Dividend To DKK2.30

The board of ISS A/S (CPH:ISS) has announced that it will be paying its dividend of DKK2.30 on the 16th of April, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.9%.

View our latest analysis for ISS

ISS' 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. However, prior to this announcement, ISS' dividend was comfortably covered by both cash flow and earnings. 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 rise by 81.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

ISS' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was DKK4.90, compared to the most recent full-year payment of DKK2.30. This works out to be a decline of approximately 8.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See ISS' Dividend Growing

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see that ISS has been growing its earnings per share at 9.7% a 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 ISS' Dividend

Overall, a dividend increase is always good, and we think that ISS 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.

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. As an example, we've identified 2 warning signs for ISS that you should be aware of before investing. Is ISS not quite the opportunity you were looking for? Why not check out our selection of top 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.