The board of Tyson Foods, Inc. (NYSE:TSN) has announced that it will pay a dividend on the 15th of December, with investors receiving $0.46 per share. This means the dividend yield will be fairly typical at 2.8%.
Tyson Foods' Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Tyson Foods was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 22.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 25%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Tyson Foods Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.16 in 2012, and the most recent fiscal year payment was $1.84. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Tyson Foods has been growing its earnings per share at 19% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Tyson Foods' prospects of growing its dividend payments in the future.
Tyson Foods Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Tyson Foods might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Tyson Foods that investors should know about before committing capital to this stock. 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.
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