The board of Republic Services, Inc. (NYSE:RSG) has announced that it will be increasing its dividend on the 14th of January to US$0.46. This takes the annual payment to 1.3% of the current stock price, which is about average for the industry.
Republic Services' Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Republic Services' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 17.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.
Republic Services Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from US$0.80 in 2011 to the most recent annual payment of US$1.84. This means that it has been growing its distributions at 8.7% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
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 Republic Services has been growing its earnings per share at 17% a 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 Republic Services' Dividend
Overall, a dividend increase is always good, and we think that Republic Services 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. As an example, we've identified 2 warning signs for Republic Services that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list 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.