Dover (NYSE:DOV) Has Affirmed Its Dividend Of $0.515

The board of Dover Corporation (NYSE:DOV) has announced that it will pay a dividend on the 16th of December, with investors receiving $0.515 per share. 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 Dover

Dover's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Dover's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 33.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 28%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dover 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. Since 2014, the annual payment back then was $1.50, compared to the most recent full-year payment of $2.06. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year 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 could be attracted to the stock based on the quality of its payment history. Dover has impressed us by growing EPS at 19% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Dover's Dividend

Overall, we like to see the dividend staying consistent, and we think Dover might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. To that end, Dover has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Dover 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.