ABM Industries' (NYSE:ABM) Shareholders Will Receive A Bigger Dividend Than Last Year

ABM Industries Incorporated's (NYSE:ABM) periodic dividend will be increasing on the 3rd of February to $0.265, with investors receiving 18% more than last year's $0.225. This will take the dividend yield to an attractive 1.6%, providing a nice boost to shareholder returns.

Check out our latest analysis for ABM Industries

ABM Industries' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, ABM Industries' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 87.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

ABM Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.62 in 2014 to the most recent total annual payment of $0.90. This implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that ABM Industries has been growing its earnings per share at 13% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ABM Industries' prospects of growing its dividend payments in the future.

We Really Like ABM Industries' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. 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 3 warning signs for ABM Industries 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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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.