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Casey’s General Stores, Inc.’s (NASDAQ:CASY) dividend will be increasing to US$0.35 on 15th of November. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Casey’s General Stores

Casey’s General Stores’ Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company’s dividend is whether the current payout levels are feasible. However, Casey’s General Stores’ earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 8.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

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Casey’s General Stores 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. Since 2011, the first annual payment was US$0.54, compared to the most recent full-year payment of US$1.40. This means that it has been growing its distributions at 10.0% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Casey’s General Stores Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Casey’s General Stores has grown earnings per share at 7.2% per year over the past five years. Casey’s General Stores definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Casey’s General Stores Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we’ve identified 2 warning signs for Casey’s General Stores that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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