Preformed Line Products (NASDAQ:PLPC) Is Due To Pay A Dividend Of $0.20

The board of Preformed Line Products Company (NASDAQ:PLPC) has announced that it will pay a dividend on the 20th of October, with investors receiving $0.20 per share. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

Check out our latest analysis for Preformed Line Products

Preformed Line Products' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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 25.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 6.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

Preformed Line Products Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. Preformed Line Products has seen EPS rising for the last five years, at 25% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Preformed Line Products' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is 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 example, we've picked out 1 warning sign for Preformed Line Products that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.