Armstrong World Industries' (NYSE:AWI) Dividend Will Be Increased To $0.28

Armstrong World Industries, Inc. (NYSE:AWI) will increase its dividend on the 16th of November to $0.28, which is 10% higher than last year's payment from the same period of $0.254. This makes the dividend yield about the same as the industry average at 1.5%.

View our latest analysis for Armstrong World Industries

Armstrong World Industries' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Armstrong World Industries was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 14.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

Armstrong World Industries Doesn't Have A Long Payment History

Armstrong World Industries' 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 2018, the annual payment back then was $0.70, compared to the most recent full-year payment of $1.02. This means that it has been growing its distributions at 7.7% per annum over that time. Armstrong World Industries has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Armstrong World Industries' EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Armstrong World Industries is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Armstrong World Industries' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Armstrong World Industries that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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