Three giant names just announced substantial dividend increases. Coming in at between 8% and 14%, these increases add real weight to the dividend income that investors receive. However, when it comes to dividend stocks, investors need to balance increases with sustainability.
The payout ratio is a key metric that helps assess sustainability. It divides a company’s dividend per share (DPS) by its earnings per share (EPS), showing the percentage of earnings paid out as dividends. Generally speaking, investors consider payout ratios near 60% or below sustainable. Importantly, all three stocks have strong dividend sustainability, despite an initial concern at one name that breaks down after examination.
