Stock Analysis

Dover (NYSE:DOV) Has Announced That It Will Be Increasing Its Dividend To US$0.50

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NYSE:DOV
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Dover Corporation (NYSE:DOV) will increase its dividend on the 15th of September to US$0.50. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

Check out our latest analysis for Dover

Dover's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Dover's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 12.6%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

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NYSE:DOV Historic Dividend August 23rd 2021

Dover Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$1.10, compared to the most recent full-year payment of US$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. We are encouraged to see that Dover has grown earnings per share at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Dover's prospects of growing its dividend payments in the future.

We Really Like Dover's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Dover that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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