Linde plc’s (NASDAQ:LIN) periodic dividend will be increasing on the 27th of March to $1.50, with investors receiving 7.9% more than last year’s $1.39. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Linde
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Linde was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 40.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from $2.60 total annually to $5.56. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. It’s good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Linde might have put its house in order since then, but we remain cautious.
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. We are encouraged to see that Linde has grown earnings per share at 28% per year over the past five years. Linde is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Overall, a dividend increase is always good, and we think that Linde is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. As an example, we’ve identified 2 warning signs for Linde that you should be aware of before investing. 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.
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