LCI Industries' (NYSE:LCII) Dividend Will Be $1.05

The board of LCI Industries (NYSE:LCII) has announced that it will pay a dividend of $1.05 per share on the 13th of September. The dividend yield will be 3.6% based on this payment which is still above the industry average.

View our latest analysis for LCI Industries

LCI Industries' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, LCI Industries' dividend made up quite a large proportion of earnings but only 27% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 26.8%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80% - on the higher side, but we wouldn't necessarily say this is unsustainable.

LCI Industries Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $2.00 in 2014 to the most recent total annual payment of $4.20. This means that it has been growing its distributions at 7.7% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though LCI Industries' EPS has declined at around 2.6% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On LCI Industries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about LCI Industries' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 picked out 1 warning sign for LCI Industries that investors should know about before committing capital to this stock. Is LCI Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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