Stock Analysis

Graco (NYSE:GGG) Is Paying Out A Larger Dividend Than Last Year

NYSE:GGG
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Graco Inc. (NYSE:GGG) has announced that it will be increasing its periodic dividend on the 7th of February to $0.255, which will be 8.5% higher than last year's comparable payment amount of $0.235. Even though the dividend went up, the yield is still quite low at only 1.1%.

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Graco'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, Graco 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.

The next year is set to see EPS grow by 21.1%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

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NYSE:GGG Historic Dividend December 7th 2023

Graco 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. The annual payment during the last 10 years was $0.333 in 2013, and the most recent fiscal year payment was $0.94. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Graco has seen EPS rising for the last five years, at 11% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Graco's prospects of growing its dividend payments in the future.

We Really Like Graco's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Graco for free with public analyst estimates for the company. Is Graco 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.