Imperial Brands Increases Dividend: Stability with Growth Potential

Imperial Brands has announced that the dividend will be increased to £0.5426 as of December 31. This corresponds to an annual payout of about 6.5% of the current share price, a value considered average for the industry. Imperial Brands' earnings appear to continue supporting solid dividend payments. So far, dividends have been reliably covered by both cash flow and profits, suggesting that a significant portion of earnings is being reinvested into the company's growth. With expected earnings per share growth of 16.5% next year, the payout ratio could be at 52%, a level that further supports the sustainability of the dividend. However, it should be noted that the dividend has been cut at least once in the past ten years, although it has increased by 2.3% annually overall. The continuous increase in earnings per share by 8.8% annually over the past five years could offer opportunities for future dividend growth. Overall, Imperial Brands appears to be a promising dividend stock. While the consistency of the dividend policy is appreciated by market participants, investors should consider additional factors before investing capital. The analysis by Simply Wall St points to two warning signals that should be taken into account.