BWX Technologies (NYSE:BWXT) Has Announced That It Will Be Increasing Its Dividend To $0.25

BWX Technologies, Inc.'s (NYSE:BWXT) dividend will be increasing from last year's payment of the same period to $0.25 on 28th of March. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

View our latest analysis for BWX Technologies

BWX Technologies' Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, BWX Technologies was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 70.3% over the next year. 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.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.40 in 2015, and the most recent fiscal year payment was $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BWX Technologies might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 3.8% per year. While EPS growth is quite low, BWX Technologies has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On BWX Technologies' Dividend

Overall, it's great to see the dividend being raised and that it is still 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for BWX Technologies that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.