Factors Affecting Sustainable Dividends

ABC Corporation has consistently paid dividends for over a decade and recently announced an increase in its dividend payout ratio. The management believes that this change reflects their confidence in sustainable earnings growth. However, several analysts question whether the company's capital expenditure needs are being adequately met with this decision.

In evaluating ABC Corporation's change in dividend policy, it is essential to consider various factors that can affect a company's ability to pay dividends. Which of the following factors is most likely to lead to a sustainable increase in dividends for ABC Corporation?