Accenture (NYSE:ACN) Is Paying Out A Larger Dividend Than Last Year

Accenture plc (NYSE:ACN) will increase its dividend from last year's comparable payment on the 15th of November to $1.48. Despite this raise, the dividend yield of 1.7% is only a modest boost to shareholder returns.

See our latest analysis for Accenture

Accenture's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before this announcement, Accenture was paying out 91% of earnings, but a comparatively small 43% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 36.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Accenture Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $1.86 in 2014, and the most recent fiscal year payment was $5.92. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Accenture's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Accenture has impressed us by growing EPS at 9.1% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look pretty sustainable with good earnings coverage and a reasonable track record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 1 warning sign for Accenture that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.