Autoliv, Inc.’s (NYSE:ALV) investors are due to receive a payment of $0.70 per share on 24th of March. This makes the dividend yield 2.8%, which is above the industry average.
Check out our latest analysis for Autoliv
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Autoliv was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 56.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.
The company has a long dividend track record, but it doesn’t look great with cuts in the past. The dividend has gone from an annual total of $2.16 in 2015 to the most recent total annual payment of $2.80. This means that it has been growing its distributions at 2.6% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company’s earnings are not consistent.
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Autoliv has grown earnings per share at 9.4% per year over the past five years. Autoliv definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we’ve picked out 2 warning signs for Autoliv that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.