Armstrong World Industries, Inc. (NYSE:AWI) will increase its dividend on the 16th of November to $0.28, which is 10% higher than last year’s payment from the same period of $0.254. This takes the annual payment to 1.5% of the current stock price, which is about average for the industry.
See our latest analysis for Armstrong World Industries
Armstrong World Industries’ Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Armstrong World Industries’ dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 14.4% over the next year. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.
Armstrong World Industries Doesn’t Have A Long Payment History
It is great to see that Armstrong World Industries has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 5 years was $0.70 in 2018, and the most recent fiscal year payment was $1.02. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Armstrong World Industries to be a consistent dividend paying stock.
Armstrong World Industries May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, Armstrong World Industries’ earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, Armstrong World Industries has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Armstrong World Industries’ Dividend
In summary, it’s great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn’t translated into a consistent payment. The payment isn’t stellar, but it could make a decent addition to a dividend portfolio.
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. For example, we’ve picked out 1 warning sign for Armstrong World Industries that investors should know about before committing capital to this stock. Is Armstrong World 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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