Tyson Foods, Inc. (NYSE:TSN) has announced that it will pay a dividend of US$0.45 per share on the 15th of December. Based on this payment, the dividend yield will be 2.3%, which is fairly typical for the industry.
Check out our latest analysis for Tyson Foods
Tyson Foods' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, Tyson Foods' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 2.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.
Tyson Foods Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was US$0.16, compared to the most recent full-year payment of US$1.78. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
We Could See Tyson Foods' Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Tyson Foods has grown earnings per share at 9.2% per year over the past five years. Tyson Foods definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Tyson Foods Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Tyson Foods that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.
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