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AZZ Inc. (NYSE:AZZ) has announced that it will pay a dividend of US$0.17 per share on the 2nd of August. This payment means that the dividend yield will be 1.7%, which is around the industry average.
View our latest analysis for AZZ
AZZ's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, AZZ's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 0.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.
AZZ Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$0.50 to US$0.68. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. AZZ has impressed us by growing EPS at 7.6% 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 AZZ's Dividend
Overall, we like to see the dividend staying consistent, and we think AZZ might even raise payments in the future. 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on AZZ management tenure, salary, and performance. 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.