The board of Loblaw Companies Limited (TSE:L) has announced that it will pay a dividend on the 1st of October, with investors receiving CA$0.513 per share. Based on this payment, the dividend yield for the company will be 1.2%, which is fairly typical for the industry.

See our latest analysis for Loblaw Companies

Loblaw Companies' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Loblaw Companies 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.

Looking forward, earnings per share is forecast to rise by 11.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend. historic-dividend

Loblaw Companies Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was CA$0.96, compared to the most recent full-year payment of CA$2.05. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Loblaw Companies has seen EPS rising for the last five years, at 30% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Loblaw Companies' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Case in point: We've spotted 2 warning signs for Loblaw Companies (of which 1 is concerning!) you should know about. 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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