Innospec (NASDAQ:IOSP) Is Increasing Its Dividend To $0.76

Innospec Inc. (NASDAQ:IOSP) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of May to $0.76. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

View our latest analysis for Innospec

Innospec's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Innospec was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 10.0%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Innospec Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.50 total annually to $1.52. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Innospec's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Innospec has impressed us by growing EPS at 9.5% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Innospec's Dividend

Overall, a dividend increase is always good, and we think that Innospec 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Innospec that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection 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.