The board of Astec Industries, Inc. (NASDAQ:ASTE) has announced that it will pay a dividend of $0.13 per share on the 30th of August. This means the dividend yield will be fairly typical at 1.6%.
Check out our latest analysis for Astec Industries
Astec Industries' Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Astec Industries' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Over the next year, EPS is forecast to expand by 35.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.
Astec Industries Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.40 total annually to $0.52. This means that it has been growing its distributions at 2.7% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Astec Industries has impressed us by growing EPS at 23% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Astec Industries could prove to be a strong dividend payer.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
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 instance, we've picked out 2 warning signs for Astec Industries that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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About NasdaqGS:ASTE
Astec Industries
Designs, engineers, manufactures, and markets equipment and components used primarily in road building and related construction activities worldwide.
Proven track record with adequate balance sheet and pays a dividend.
