Insteel Industries (NYSE:IIIN) Is Paying Out A Dividend Of $1.03

Insteel Industries Inc. (NYSE:IIIN) will pay a dividend of $1.03 on the 12th of December. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

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Insteel Industries' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Insteel Industries was paying a whopping 115% as a dividend, but this only made up 5.7% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 75.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Insteel Industries

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from $0.12 total annually to $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Insteel Industries has seen EPS rising for the last five years, at 16% 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.

Our Thoughts On Insteel Industries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Insteel Industries' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Insteel Industries that you should be aware of before investing. Is Insteel Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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