Crown Holdings, Inc. (NYSE:CCK) will increase its dividend on the 1st of April to $0.26, which is 4.0% higher than last year's payment from the same period of $0.25. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

See our latest analysis for Crown Holdings

Crown Holdings' Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Crown Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 96.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Crown Holdings Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from $0.80 total annually to $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Crown Holdings May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 4.6% per year. While EPS growth is quite low, Crown Holdings has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Crown Holdings' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Crown Holdings that investors should take into consideration. Is Crown Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.