LKQ's (NASDAQ:LKQ) Upcoming Dividend Will Be Larger Than Last Year's

LKQ Corporation (NASDAQ:LKQ) will increase its dividend from last year's comparable payment on the 1st of June to $0.275. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

Check out our latest analysis for LKQ

LKQ's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, LKQ's 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 7.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

LKQ Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. LKQ has seen EPS rising for the last five years, at 19% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like LKQ's Dividend

Overall, a dividend increase is always good, and we think that LKQ is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 3 warning signs for LKQ that you should be aware of before investing. Is LKQ 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.