The board of Graco Inc. (NYSE:GGG) has announced that it will be paying its dividend of $0.275 on the 5th of February, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.
Check out our latest analysis for Graco
Graco's Payment Could Potentially Have Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Graco's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
The next year is set to see EPS grow by 32.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.
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 $0.367 in 2014, and the most recent fiscal year payment was $1.10. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Graco Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Graco has been growing its earnings per share at 7.6% a year over the past five years. Graco definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Graco's Dividend
Overall, a dividend increase is always good, and we think that Graco 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. 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. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Graco analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.
About NYSE:GGG
Graco
Designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide.
Flawless balance sheet average dividend payer.
