Donaldson Company (NYSE:DCI) Will Pay A Larger Dividend Than Last Year At $0.27

Donaldson Company, Inc. (NYSE:DCI) will increase its dividend from last year's comparable payment on the 28th of June to $0.27. The payment will take the dividend yield to 1.4%, which is in line with the average for the industry.

View our latest analysis for Donaldson Company

Donaldson Company's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Donaldson Company'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.

The next year is set to see EPS grow by 33.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Donaldson Company Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.52, compared to the most recent full-year payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Donaldson Company has grown earnings per share at 6.4% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Donaldson Company's prospects of growing its dividend payments in the future.

We Really Like Donaldson Company's Dividend

Overall, a dividend increase is always good, and we think that Donaldson Company is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Donaldson Company analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Donaldson Company not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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