Yahoo Finance Loblaw Companies (TSE:L) Is Paying Out A Larger Dividend Than Last Year
The board of Loblaw Companies Limited (TSE:L) has announced that it will be increasing its dividend on the 1st of July to CA$0.41. The announced payment will take the dividend yield to 1.3%, which is in line with the average for the industry.
View our latest analysis for Loblaw Companies
Loblaw Companies' Earnings Easily Cover the Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Loblaw Companies' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 6.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 29%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Loblaw Companies Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from CA$0.84 to CA$1.46. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Loblaw Companies has impressed us by growing EPS at 19% 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.
We Really Like Loblaw Companies' Dividend
Overall, a dividend increase is always good, and we think that Loblaw Companies is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Loblaw Companies (1 shouldn't be ignored!) 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.
