Travel + Leisure (NYSE:TNL) Is Paying Out A Larger Dividend Than Last Year

Travel + Leisure Co. (NYSE:TNL) will increase its dividend from last year's comparable payment on the 29th of March to $0.50. This takes the dividend yield to 4.4%, which shareholders will be pleased with.

See our latest analysis for Travel + Leisure

Travel + Leisure's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Travel + Leisure's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 26.3% over the next year. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $1.16 in 2014 to the most recent total annual payment of $2.00. This implies that the company grew its distributions at a yearly rate of about 5.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Travel + Leisure might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Travel + Leisure has impressed us by growing EPS at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Travel + Leisure's prospects of growing its dividend payments in the future.

Travel + Leisure Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Travel + Leisure 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Travel + Leisure has 3 warning signs (and 1 which is significant) we think you should know about. 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.