Vulcan Materials' (NYSE:VMC) Shareholders Will Receive A Bigger Dividend Than Last Year

Vulcan Materials Company (NYSE:VMC) has announced that it will be increasing its periodic dividend on the 24th of March to $0.49, which will be 6.5% higher than last year's comparable payment amount of $0.46. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Vulcan Materials

Vulcan Materials' Payment Could Potentially Have 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. However, prior to this announcement, Vulcan Materials' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 58.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Vulcan Materials Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $0.20 total annually to $1.84. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Vulcan Materials has seen EPS rising for the last five years, at 8.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Vulcan Materials' prospects of growing its dividend payments in the future.

Vulcan Materials Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Vulcan Materials is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Vulcan Materials that you should be aware of before investing. Is Vulcan Materials 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.