AZZ Inc. (NYSE:AZZ) will pay a dividend of $0.17 on the 7th of February. This payment means that the dividend yield will be 1.2%, which is around the industry average.
See our latest analysis for AZZ
AZZ's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, AZZ's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 15.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.
AZZ Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.56 in 2014 to the most recent total annual payment of $0.68. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
AZZ May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.9% a year for the past five years, which isn't massive but still better than seeing them shrink. If AZZ is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
AZZ Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 AZZ that investors should take into consideration. Is AZZ not quite the opportunity you were looking for? Why not check out our selection of top 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.
About NYSE:AZZ
AZZ
Provides hot-dip galvanizing and coil coating solutions in North America.
Average dividend payer with moderate growth potential.
