NewMarket (NYSE:NEU) Has Announced That It Will Be Increasing Its Dividend To $2.75

NewMarket Corporation's (NYSE:NEU) periodic dividend will be increasing on the 1st of April to $2.75, with investors receiving 10% more than last year's $2.50. The payment will take the dividend yield to 1.8%, which is in line with the average for the industry.

View our latest analysis for NewMarket

NewMarket's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, NewMarket's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 16.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

NewMarket Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $4.40 in 2015 to the most recent total annual payment of $10.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. NewMarket has impressed us by growing EPS at 16% per year over the past five years. NewMarket definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like NewMarket's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for NewMarket that you should be aware of before investing. Is NewMarket not quite the opportunity you were looking for? Why not check out our selection of top 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.