nVent Electric (NYSE:NVT) Has Announced That It Will Be Increasing Its Dividend To $0.20

The board of nVent Electric plc (NYSE:NVT) has announced that it will be increasing its dividend by 5.3% on the 7th of February to $0.20, up from last year's comparable payment of $0.19. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

See our latest analysis for nVent Electric

nVent Electric'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, nVent Electric's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 16.7%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.

nVent Electric Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 6 years was $0.70 in 2018, and the most recent fiscal year payment was $0.76. This means that it has been growing its distributions at 1.4% per annum over that time. nVent Electric hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that nVent Electric has grown earnings per share at 20% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

nVent Electric Looks Like A Great Dividend Stock

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 generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for nVent Electric that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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