WD-40 (NASDAQ:WDFC) Will Pay A Larger Dividend Than Last Year At $0.94

The board of WD-40 Company (NASDAQ:WDFC) has announced that it will be increasing its dividend by 6.8% on the 31st of January to $0.94, up from last year's comparable payment of $0.88. Even though the dividend went up, the yield is still quite low at only 1.3%.

Check out our latest analysis for WD-40

WD-40's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, WD-40's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 9.2% over the next year. If the dividend continues on this path, the payout ratio could be 70% by next year, which we think can be pretty sustainable going forward.

WD-40 Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.36 in 2014, and the most recent fiscal year payment was $3.52. This means that it has been growing its distributions at 10.0% 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's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 4.9% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.9% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

WD-40 Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that WD-40 is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for WD-40 that investors should know about before committing capital to this stock. 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.