Ingredion (NYSE:INGR) Will Pay A Larger Dividend Than Last Year At $0.78

Ingredion Incorporated (NYSE:INGR) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of October to $0.78. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.

See our latest analysis for Ingredion

Ingredion's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Ingredion was paying only paying out a fraction of earnings, but the payment was a massive 165% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 14.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ingredion Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.04 in 2013, and the most recent fiscal year payment was $3.12. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Ingredion May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 3.8% per year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Ingredion's Dividend

Overall, we always like to see the dividend being raised, but we don't think Ingredion will make a great income stock. While Ingredion is earning enough to cover the payments, the cash flows are lacking. We don't think Ingredion is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Ingredion you should be aware of, and 1 of them is a bit unpleasant. 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.