It looks like Dover Corporation (NYSE:DOV) is about to go ex-dividend in the next 4 days. You can purchase shares before the 29th of August in order to receive the dividend, which the company will pay on the 16th of September.
Dover’s next dividend payment will be US$0.49 per share, on the back of last year when the company paid a total of US$1.96 to shareholders. Based on the last year’s worth of payments, Dover stock has a trailing yield of around 2.2% on the current share price of $88.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That’s why it’s good to see Dover paying out a modest 45% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 42% of its free cash flow in the past year.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It’s not encouraging to see that Dover’s earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Dover has delivered 7.0% dividend growth per year on average over the past 10 years.
Is Dover an attractive dividend stock, or better left on the shelf? While it’s not great to see that earnings per share are effectively flat over the ten-year period we checked, at least the payout ratios are low and conservative. In summary, it’s hard to get excited about Dover from a dividend perspective.
Ever wonder what the future holds for Dover? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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