Eastern (NASDAQ:EML) Is Due To Pay A Dividend Of $0.11

The board of The Eastern Company (NASDAQ:EML) has announced that it will pay a dividend of $0.11 per share on the 16th of June. This means the annual payment is 2.1% of the current stock price, which is above the average for the industry.

We've discovered 1 warning sign about Eastern. View them for free.

Eastern's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Eastern's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 0.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Eastern

Eastern Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. There hasn't been much of a change in the dividend over the last 10 years. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Eastern's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Eastern is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Eastern Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Eastern that investors need to be conscious of moving forward. Is Eastern not quite the opportunity you were looking for? Why not check out our selection of top 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.