Eaton's (NYSE:ETN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Eaton Corporation plc (NYSE:ETN) has announced that it will be paying its dividend of $1.04 on the 28th of March, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.

Check out our latest analysis for Eaton

Eaton's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Eaton's dividend was comfortably covered by both cash flow and earnings. 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 45.1% over the next year. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Eaton Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.96 in 2015 to the most recent total annual payment of $4.16. This means that it has been growing its distributions at 7.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Eaton has impressed us by growing EPS at 13% per year over the past five years. Eaton definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Eaton's Dividend

Overall, a dividend increase is always good, and we think that Eaton is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Eaton that investors should know about before committing capital to this stock. 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.