Tecnoglass (NYSE:TGLS) Is Increasing Its Dividend To $0.11

Tecnoglass Inc. (NYSE:TGLS) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of April to $0.11. Even though the dividend went up, the yield is still quite low at only 1.0%.

View our latest analysis for Tecnoglass

Tecnoglass' Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Tecnoglass' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 19.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.3% by next year, which is in a pretty sustainable range.

Tecnoglass' Dividend Has Lacked Consistency

Looking back, Tecnoglass' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was $0.50, compared to the most recent full-year payment of $0.44. This works out to be a decline of approximately 1.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Tecnoglass has seen EPS rising for the last five years, at 76% per annum. 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.

We Really Like Tecnoglass' Dividend

Overall, a dividend increase is always good, and we think that Tecnoglass is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Tecnoglass that you should be aware of before investing. 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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