Allegion plc (NYSE:ALLE) has announced that it will be increasing its periodic dividend on the 31st of March to $0.51, which will be 6.3% higher than last year's comparable payment amount of $0.48. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.

Check out our latest analysis for Allegion

Allegion's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Allegion's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 38.0% over the next year. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Allegion Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $0.32, compared to the most recent full-year payment of $1.92. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Allegion Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Allegion has impressed us by growing EPS at 6.4% per year over the past five years. Allegion definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Allegion's Dividend

Overall, a dividend increase is always good, and we think that Allegion is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Allegion that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.