Comcast's (NASDAQ:CMCSA) Dividend Will Be Increased To $0.29

The board of Comcast Corporation (NASDAQ:CMCSA) has announced that it will be paying its dividend of $0.29 on the 26th of April, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.9%, which is in line with the average for the industry.

Check out our latest analysis for Comcast

Comcast's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before this announcement, Comcast was paying out 89% of earnings, but a comparatively small 41% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Comcast Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.325, compared to the most recent full-year payment of $1.16. This means that it has been growing its distributions at 14% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Comcast's earnings per share has shrunk at 24% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Comcast's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Comcast is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 4 warning signs for Comcast that investors should take into consideration. Is Comcast 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.