LCI Industries (NYSE:LCII) Has Announced That It Will Be Increasing Its Dividend To $1.15

The board of LCI Industries (NYSE:LCII) has announced that the dividend on 13th of December will be increased to $1.15, which will be 9.5% higher than last year's payment of $1.05 which covered the same period. This makes the dividend yield 3.7%, which is above the industry average.

See our latest analysis for LCI Industries

LCI Industries' Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, LCI Industries was paying out 82% of earnings, but a comparatively small 30% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 68.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

LCI Industries 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 annual payment during the last 10 years was $2.00 in 2014, and the most recent fiscal year payment was $4.20. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. LCI Industries hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On LCI Industries' Dividend

In summary, while it's always good to see the dividend being raised, we don't think LCI Industries' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think LCI Industries is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for LCI Industries that investors should take into consideration. 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.