The board of AZZ Inc. (NYSE:AZZ) has announced that it will pay a dividend on the 31st of July, with investors receiving $0.17 per share. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for AZZ
AZZ's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, AZZ was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 68.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.
AZZ 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. Since 2014, the dividend has gone from $0.56 total annually to $0.68. This means that it has been growing its distributions at 2.0% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
We Could See AZZ's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that AZZ has been growing its earnings per share at 8.3% a 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 should note that AZZ has issued stock equal to 19% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
We Really Like AZZ's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for AZZ (of which 1 is a bit unpleasant!) you should know about. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About NYSE:AZZ
AZZ
Provides hot-dip galvanizing and coil coating solutions in North America.
Good value average dividend payer.
