Autoliv, Inc.’s (NYSE:ALV) dividend will be increasing from last year’s payment of the same period to $0.85 on 23rd of September. This takes the dividend yield to 2.6%, which shareholders will be pleased with.
If the payments aren’t sustainable, a high yield for a few years won’t matter that much. However, Autoliv’s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 38.3%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Autoliv
The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $2.16 in 2015 to the most recent total annual payment of $2.80. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It’s encouraging to see that Autoliv has been growing its earnings per share at 13% a 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.
Overall, a dividend increase is always good, and we think that Autoliv is a strong income stock thanks to its track record and growing earnings. 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.
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 2 warning signs for Autoliv 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.