Stock Analysis

Dover (NYSE:DOV) Is Due To Pay A Dividend Of US$0.50

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NYSE:DOV
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Dover Corporation (NYSE:DOV) has announced that it will pay a dividend of US$0.50 per share on the 15th of March. This payment means the dividend yield will be 1.2%, which is below the average for the industry.

Check out our latest analysis for Dover

Dover's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Dover'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.

Looking forward, earnings per share is forecast to fall by 2.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 27%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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NYSE:DOV Historic Dividend February 17th 2022

Dover Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was US$1.10 in 2012, and the most recent fiscal year payment was US$2.00. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Dover has seen EPS rising for the last five years, at 19% per annum. 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

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Dover that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Dover?

Dover Corporation provides equipment and components, consumable supplies, aftermarket parts, software and digital solutions, and support services worldwide.

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Rewards

  • Trading at 20.4% below our estimate of its fair value

  • Earnings are forecast to grow 5.88% per year

  • Earnings grew by 23.5% over the past year

Risks

  • Has a high level of debt

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