ABM Industries Incorporated's (NYSE:ABM) periodic dividend will be increasing on the 6th of February to $0.22, with investors receiving 13% more than last year's $0.195. This takes the dividend yield to 1.7%, which shareholders will be pleased with.
ABM Industries' Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, ABM Industries was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 32.7%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.
ABM Industries 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. Since 2012, the dividend has gone from $0.58 total annually to $0.78. This works out to be a compound annual growth rate (CAGR) of approximately 3.0% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. ABM Industries has impressed us by growing EPS at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While ABM Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for ABM Industries (1 is concerning!) that you should be aware of before investing. Is ABM Industries 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.
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