Livestock Improvement's (NZSE:LIC) Dividend Will Be Increased To NZ$0.1222

Livestock Improvement Corporation Limited's (NZSE:LIC) periodic dividend will be increasing on the 15th of August to NZ$0.1222, with investors receiving 109% more than last year's NZ$0.0584. Despite this raise, the dividend yield of 6.1% is only a modest boost to shareholder returns.

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Livestock Improvement's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Livestock Improvement 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.

Over the next year, EPS could expand by 8.3% if recent trends continue. 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.

Check out our latest analysis for Livestock Improvement

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of NZ$0.0898 in 2015 to the most recent total annual payment of NZ$0.0584. Doing the maths, this is a decline of about 4.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Livestock Improvement has grown earnings per share at 8.3% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Livestock Improvement Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Livestock Improvement 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Livestock Improvement (2 are a bit concerning!) that you should be aware of before investing. Is Livestock Improvement 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.