The board of Installed Building Products, Inc. (NYSE:IBP) has announced that it will be paying its dividend of $2.07 on the 31st of March, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.8%.

Check out our latest analysis for Installed Building Products

Installed Building Products' Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Installed Building Products was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 19.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Installed Building Products Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2021, the annual payment back then was $1.20, compared to the most recent full-year payment of $3.18. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Installed Building Products has impressed us by growing EPS at 32% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Installed Building Products' Dividend

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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Installed Building Products that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.