BorgWarner (NYSE:BWA) Is Paying Out A Dividend Of $0.17

The board of BorgWarner Inc. (NYSE:BWA) has announced that it will pay a dividend on the 15th of June, with investors receiving $0.17 per share. This payment means the dividend yield will be 1.5%, which is below the average for the industry.

See our latest analysis for BorgWarner

BorgWarner's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, BorgWarner was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 72.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 10.0%, which is in the range that makes us comfortable with the sustainability of the dividend.

BorgWarner Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.50 in 2013 to the most recent total annual payment of $0.68. This means that it has been growing its distributions at 3.1% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that BorgWarner has been growing its earnings per share at 13% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like BorgWarner's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for BorgWarner that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.