Stock Analysis

BorgWarner's (NYSE:BWA) Dividend Will Be $0.17

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BorgWarner Inc. (NYSE:BWA) has announced that it will pay a dividend of $0.17 per share on the 15th of September. This means the annual payment will be 1.7% of the current stock price, which is lower than the industry average.

View our latest analysis for BorgWarner

BorgWarner's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, BorgWarner's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 129.7%. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

NYSE:BWA Historic Dividend August 15th 2022

BorgWarner Is Still Building Its Track Record

BorgWarner's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2013, the dividend has gone from $0.50 total annually to $0.68. This means that it has been growing its distributions at 3.5% per annum over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. BorgWarner has impressed us by growing EPS at 25% 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 BorgWarner's Dividend

Overall, we like to see the dividend staying consistent, and we think BorgWarner might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for BorgWarner that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Valuation is complex, but we're helping make it simple.

Find out whether BorgWarner is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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BorgWarner Inc. provides solutions for combustion, hybrid, and electric vehicles worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth3
Past Performance5
Financial Health5

Read more about these checks in the individual report sections or in our analysis model.

Undervalued with solid track record.