nVent Electric (NYSE:NVT) Is Increasing Its Dividend To $0.19

The board of nVent Electric plc (NYSE:NVT) has announced that it will be increasing its dividend by 8.6% on the 2nd of February to $0.19, up from last year's comparable payment of $0.175. Even though the dividend went up, the yield is still quite low at only 1.2%.

Check out our latest analysis for nVent Electric

nVent Electric's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, nVent Electric's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 5.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. There hasn't been much of a change in the dividend over the last 5 years. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

nVent Electric Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. nVent Electric has impressed us by growing EPS at 9.7% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for nVent Electric's prospects of growing its dividend payments in the future.

We Really Like nVent Electric's Dividend

Overall, a dividend increase is always good, and we think that nVent Electric 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for nVent Electric 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.