Booz Allen Hamilton Holding Corporation (NYSE:BAH) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of March to $0.55. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.

Check out our latest analysis for Booz Allen Hamilton Holding

Booz Allen Hamilton Holding's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Booz Allen Hamilton Holding's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 24.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $2.44 in 2015, and the most recent fiscal year payment was $2.20. Doing the maths, this is a decline of about 1.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Booz Allen Hamilton Holding has grown earnings per share at 17% per year over the past five years. Booz Allen Hamilton Holding definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Booz Allen Hamilton Holding 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. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Booz Allen Hamilton Holding that you should be aware of before investing. 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.