Stock Analysis

Allegion (NYSE:ALLE) Is Paying Out A Larger Dividend Than Last Year

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NYSE:ALLE
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Allegion plc (NYSE:ALLE) has announced that it will be increasing its dividend on the 31st of March to US$0.41. The announced payment will take the dividend yield to 1.2%, which is in line with the average for the industry.

Check out our latest analysis for Allegion

Allegion's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Allegion's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 8.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:ALLE Historic Dividend February 10th 2022

Allegion Doesn't Have A Long Payment History

Allegion's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the first annual payment was US$0.32, compared to the most recent full-year payment of US$1.64. This means that it has been growing its distributions at 23% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Allegion has seen EPS rising for the last five years, at 17% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Allegion Looks Like A Great Dividend Stock

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Allegion that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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