DCC plc (LON:DCC) has announced that it will be increasing its dividend on the 21st of July to UK£1.20. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.
View our latest analysis for DCC
DCC's Earnings Easily Cover the Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, DCC was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 25.2% over the next year. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.
DCC Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was UK£0.61 in 2012, and the most recent fiscal year payment was UK£1.76. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Growth Potential
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 DCC has been growing its earnings per share at 6.9% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We Really Like DCC's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 12 analysts we track are forecasting for DCC for free with public analyst estimates for the company. 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.
About LSE:DCC
DCC
Engages in the sales, marketing, and distribution of carbon energy solutions worldwide.
Very undervalued with flawless balance sheet and pays a dividend.
