ABM Industries' (NYSE:ABM) Upcoming Dividend Will Be Larger Than Last Year's

ABM Industries Incorporated's (NYSE:ABM) dividend will be increasing from last year's payment of the same period to $0.22 on 6th of February. This will take the annual payment to 1.9% of the stock price, which is above what most companies in the industry pay.

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ABM Industries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, ABM Industries was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 31.8%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

ABM Industries Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $0.58, compared to the most recent full-year payment of $0.88. This means that it has been growing its distributions at 4.3% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that ABM Industries has been growing its earnings per share at 15% 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While ABM Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for ABM Industries (1 can't be ignored!) 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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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.