Preformed Line Products (NASDAQ:PLPC) Has Announced A Dividend Of $0.20

Preformed Line Products Company (NASDAQ:PLPC) will pay a dividend of $0.20 on the 25th of January. Including this payment, the dividend yield on the stock will be 1.0%, which is a modest boost for shareholders' returns.

See our latest analysis for Preformed Line Products

Preformed Line Products' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Preformed Line Products was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 23.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 6.8% by next year, which we think can be pretty sustainable going forward.

Preformed Line Products Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of $0.80 was flat on the annual payment from10 years ago. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Preformed Line Products has been growing its earnings per share at 23% a 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Preformed Line Products is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Preformed Line Products management tenure, salary, and performance. 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.