ISS' (CPH:ISS) Shareholders Will Receive A Bigger Dividend Than Last Year

ISS A/S' (CPH:ISS) dividend will be increasing from last year's payment of the same period to DKK2.30 on 16th of April. The payment will take the dividend yield to 1.8%, which is in line with the average for the industry.

View our latest analysis for ISS

ISS' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, ISS' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 81.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

ISS' Dividend Has Lacked Consistency

Looking back, ISS' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of DKK4.90 in 2015 to the most recent total annual payment of DKK2.30. The dividend has shrunk at around 8.1% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. ISS has seen EPS rising for the last five years, at 9.7% per annum. ISS definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for ISS that investors need to be conscious of moving forward. 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.