Dana (NYSE:DAN) Will Pay A Dividend Of US$0.10

By
Simply Wall St
Published
February 20, 2022
NYSE:DAN
Source: Shutterstock

Dana Incorporated (NYSE:DAN) has announced that it will pay a dividend of US$0.10 per share on the 25th of March. This means the dividend yield will be fairly typical at 1.8%.

View our latest analysis for Dana

Dana's Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Dana's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 45.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:DAN Historic Dividend February 20th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was US$0.20 in 2012, and the most recent fiscal year payment was US$0.40. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Dana has grown earnings per share at 26% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Dana is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Dana (of which 1 is a bit concerning!) you should know about. Is Dana not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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