Ecolab (NYSE:ECL) Has Announced That It Will Be Increasing Its Dividend To $0.65

The board of Ecolab Inc. (NYSE:ECL) has announced that it will be increasing its dividend by 14% on the 15th of January to $0.65, up from last year's comparable payment of $0.57. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

See our latest analysis for Ecolab

Ecolab's Future Dividend Projections Appear Well Covered By Earnings

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, Ecolab 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.

The next year is set to see EPS grow by 29.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ecolab Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $1.10, compared to the most recent full-year payment of $2.28. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Ecolab's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Ecolab has impressed us by growing EPS at 7.8% 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.

Ecolab Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Ecolab is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Ecolab that investors should know about before committing capital to this stock. Is Ecolab not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.