Rockwell Automation (NYSE:ROK) Is Increasing Its Dividend To $1.38

The board of Rockwell Automation, Inc. (NYSE:ROK) has announced that the dividend on 10th of December will be increased to $1.38, which will be 5.3% higher than last year's payment of $1.31 which covered the same period. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

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Rockwell Automation'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. The last dividend was quite easily covered by Rockwell Automation's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 57.2%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Rockwell Automation

Rockwell Automation Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $2.60, compared to the most recent full-year payment of $5.24. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. 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 Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Rockwell Automation has grown earnings per share at 5.3% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Rockwell Automation'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. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Rockwell Automation 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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