Standard Motor Products (NYSE:SMP) Has Announced A Dividend Of $0.29

Standard Motor Products, Inc.'s (NYSE:SMP) investors are due to receive a payment of $0.29 per share on 1st of March. Based on this payment, the dividend yield on the company's stock will be 2.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Standard Motor Products

Standard Motor Products' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Standard Motor Products' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 12.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was $0.44, compared to the most recent full-year payment of $1.16. This means that it has been growing its distributions at 10% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Standard Motor Products has seen EPS rising for the last five years, at 13% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Standard Motor Products' prospects of growing its dividend payments in the future.

Standard Motor Products Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Standard Motor Products that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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