The Gorman-Rupp Company's (NYSE:GRC) investors are due to receive a payment of $0.18 per share on 8th of March. Based on this payment, the dividend yield on the company's stock will be 2.1%, which is an attractive boost to shareholder returns.
See our latest analysis for Gorman-Rupp
Gorman-Rupp's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Gorman-Rupp was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 24.5%. If the dividend continues on this path, the payout ratio could be 57% by next year, which we think can be pretty sustainable going forward.
Gorman-Rupp 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 dividend has gone from $0.32 total annually to $0.72. This means that it has been growing its distributions at 8.4% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth May Be Hard To Come By
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Gorman-Rupp has seen earnings per share falling at 5.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
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. As an example, we've identified 1 warning sign for Gorman-Rupp that you should be aware of before investing. Is Gorman-Rupp 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.
About NYSE:GRC
Gorman-Rupp
Designs, manufactures, and sells pumps and pump systems in the United States and internationally.
Established dividend payer with proven track record.
