Over the past 10 years Harley-Davidson Inc (NYSE:HOG) has been paying dividends to shareholders. The company currently pays out a dividend yield of 3.6% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Harley-Davidson in more detail.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Harley-Davidson fit our criteria?
The current trailing twelve-month payout ratio for the stock is 46%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 40%, leading to a dividend yield of 3.8%. However, EPS should increase to $3.49, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although HOG’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Harley-Davidson generates a yield of 3.6%, which is on the low-side for Auto stocks.
Keeping in mind the dividend characteristics above, Harley-Davidson is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HOG’s future growth? Take a look at our free research report of analyst consensus for HOG’s outlook.
- Valuation: What is HOG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HOG is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.