NIKE (NYSE:NKE) Will Pay A Larger Dividend Than Last Year At $0.37

The board of NIKE, Inc. (NYSE:NKE) has announced that it will be increasing its dividend by 8.8% on the 2nd of January to $0.37, up from last year's comparable payment of $0.34. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

View our latest analysis for NIKE

NIKE's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, NIKE's dividend was comfortably covered by both cash flow and 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 59.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

NIKE Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.42 in 2013, and the most recent fiscal year payment was $1.36. This means that it has been growing its distributions at 12% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. NIKE has seen EPS rising for the last five years, at 21% per annum. NIKE is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

NIKE Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that NIKE 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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 36 NIKE analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.