Jacobs Engineering Group Inc. (NYSE:J) the dividend will increase to $0.23 on March 25. Even though the dividend has increased, the yield is still quite low at just 0.7%.

Check out our latest analysis for Jacobs Engineering Group

Jacobs Engineering Group dividend well covered by earnings

While yield is important, another factor to consider regarding a company’s dividend is whether current payout levels are achievable. Prior to making the announcement, Jacobs Engineering Group was easily earning enough to cover the dividend. This means most of his income is kept to grow the business.

Looking ahead, earnings per share are expected to increase 97.7% over the next year. Assuming the dividend continues on recent trends, we think the payout ratio could be 16% by next year, which is in a fairly sustainable range.

Jacobs Engineering Group does not have a long payment history

Even though the company has been paying out a consistent dividend for some time, we’d like to see a few more years before we feel comfortable counting on it. The dividend increased from US$0.60 in 2017 to the last annual payment of US$0.92. This means that it has increased its distributions by 8.9% per year during this period. Investors will likely want to see a longer growth track record before making the decision to add it to their income portfolio.

The dividend should increase

Investors in the company will be happy to have received dividend income for a while. We are encouraged to see that Jacobs Engineering Group has increased its earnings per share by 13% per year over the past five years. Jacobs Engineering Group definitely has the potential to increase its dividend in the future with earnings on an uptrend and a low payout ratio.

We really like the Jacobs Engineering Group dividend

In summary, it is always positive to see the dividend increase, and we are particularly satisfied with its overall sustainability. Distributions are quite easily covered by earnings, which are also converted into cash flow. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.

Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. However, there are other things for investors to consider when analyzing stock performance. For example, we chose 1 warning sign for Jacobs Engineering Group that investors should consider. Looking for more high yield dividend ideas? Try our curated list of strong dividend payers.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.