Winnebago Industries (NYSE:WGO) Is Increasing Its Dividend To US$0.18

By
Simply Wall St
Published
September 04, 2021
NYSE:WGO
Source: Shutterstock

Winnebago Industries, Inc. (NYSE:WGO) has announced that it will be increasing its dividend on the 29th of September to US$0.18. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

See our latest analysis for Winnebago Industries

Winnebago Industries' Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Winnebago Industries' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 12.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.3% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:WGO Historic Dividend September 5th 2021

Winnebago Industries Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the dividend has gone from US$0.36 to US$0.72. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Winnebago Industries has impressed us by growing EPS at 34% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Winnebago Industries' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Winnebago Industries that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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