Walmart Inc.'s (NYSE:WMT) periodic dividend will be increasing on the 7th of April to $0.235, with investors receiving 13% more than last year's $0.208. Even though the dividend went up, the yield is still quite low at only 0.9%.

View our latest analysis for Walmart

Walmart's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Walmart's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 38.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Walmart Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.653 in 2015 to the most recent total annual payment of $0.83. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

We Could See Walmart's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Walmart has grown earnings per share at 6.8% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Walmart Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Walmart that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.