LyondellBasell Industries (NYSE:LYB) Has Announced That It Will Be Increasing Its Dividend To $1.37

The board of LyondellBasell Industries N.V. (NYSE:LYB) has announced that it will be increasing its dividend by 2.2% on the 9th of June to $1.37, up from last year's comparable payment of $1.34. This takes the dividend yield to 9.5%, which shareholders will be pleased with.

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LyondellBasell Industries' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next year is set to see EPS grow by 180.5%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 70% which brings it into quite a comfortable range.

See our latest analysis for LyondellBasell Industries

LyondellBasell Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $2.80 in 2015, and the most recent fiscal year payment was $5.36. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though LyondellBasell Industries' EPS has declined at around 18% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

LyondellBasell Industries' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think LyondellBasell Industries will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

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. For example, we've identified 4 warning signs for LyondellBasell Industries (1 doesn't sit too well with us!) that you should be aware of before investing. Is LyondellBasell Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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