It looks like Oshkosh Corporation (NYSE:OSK) is about to go ex-dividend in the next 4 days. You can purchase shares before the 13th of February in order to receive the dividend, which the company will pay on the 28th of February.
Oshkosh’s next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Based on the last year’s worth of payments, Oshkosh stock has a trailing yield of around 1.4% on the current share price of $87.23. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether Oshkosh has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Oshkosh
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Oshkosh is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 25% of its free cash flow last year.
It’s positive to see that Oshkosh’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Oshkosh’s earnings per share have been growing at 17% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past six years, Oshkosh has increased its dividend at approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Oshkosh worth buying for its dividend? Oshkosh has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There’s a lot to like about Oshkosh, and we would prioritise taking a closer look at it.
Wondering what the future holds for Oshkosh? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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