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

By
Simply Wall St
Published
February 24, 2022
NYSE:ALLE
Source: Shutterstock

Allegion plc's (NYSE:ALLE) dividend will be increasing to US$0.41 on 31st of March. The announced payment will take the dividend yield to 1.4%, which is in line with the average for the industry.

Check out our latest analysis for Allegion

Allegion's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Allegion was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 5.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:ALLE Historic Dividend February 24th 2022

Allegion Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from US$0.32 in 2014 to the most recent annual payment of US$1.64. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Allegion has impressed us by growing EPS at 18% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Allegion's Dividend

Overall, a dividend increase is always good, and we think that Allegion is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 2 warning signs for Allegion that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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