LKQ (NASDAQ:LKQ) Is Paying Out A Dividend Of $0.30

LKQ Corporation (NASDAQ:LKQ) has announced that it will pay a dividend of $0.30 per share on the 27th of November. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

Check out our latest analysis for LKQ

LKQ's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, LKQ was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 61.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

LKQ Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $1.00 in 2021 to the most recent total annual payment of $1.20. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that LKQ has been growing its earnings per share at 14% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

LKQ Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

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. Taking the debate a bit further, we've identified 3 warning signs for LKQ that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.