Avery Dennison (NYSE:AVY) Is Increasing Its Dividend To US$0.68

By
Simply Wall St
Published
July 25, 2021
NYSE:AVY
Source: Shutterstock

Avery Dennison Corporation's (NYSE:AVY) dividend will be increasing to US$0.68 on 15th of September. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

View our latest analysis for Avery Dennison

Avery Dennison's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Avery Dennison's dividend was comfortably covered by both cash flow and earnings. 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 14.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

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NYSE:AVY Historic Dividend July 25th 2021

Avery Dennison Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.80, compared to the most recent full-year payment of US$2.72. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Avery Dennison has been growing its earnings per share at 19% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Avery Dennison's prospects of growing its dividend payments in the future.

Avery Dennison Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Avery Dennison has 3 warning signs (and 1 which is a bit concerning) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. 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.
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