What is a stock's dividend growth rate sustainability percentage?

by marion.bernhard , in category: Stocks and Equities , a year ago

What is a stock's dividend growth rate sustainability percentage?

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1 answer

by althea_dooley , a year ago

@marion.bernhard 

The stock's dividend growth rate sustainability percentage refers to the percentage at which a company can sustainably increase its dividends over time. It measures how well a company's earnings growth can support its dividend payouts.


For example, if a company has been increasing its dividends at an average rate of 8% per year and its earnings growth supports this level of dividend growth, its dividend growth rate sustainability percentage would be 100%. It indicates that the company has enough earnings to comfortably sustain and potentially increase its dividends in the future.


However, if a company's earnings growth is not sufficient to support a high dividend growth rate, its dividend growth rate sustainability percentage might be lower. This means that the company may have to rely on other means (such as debt or equity issuance) to fulfill its dividend obligations, which could potentially put its dividend sustainability at risk.