Quanex Building Products (NYSE:NX) Has Affirmed Its Dividend Of $0.08

Quanex Building Products Corporation (NYSE:NX) will pay a dividend of $0.08 on the 31st of March. This makes the dividend yield 1.7%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Quanex Building Products' stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Quanex Building Products

Quanex Building Products' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Quanex Building Products' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, so there isn't too much pressure on the dividend.

Quanex Building Products Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.16 total annually to $0.32. This means that it has been growing its distributions at 7.2% per annum over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Quanex Building Products has grown earnings per share at 34% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

An additional note is that the company has been raising capital by issuing stock equal to 43% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like Quanex Building Products' Dividend

Overall, we like to see the dividend staying consistent, and we think Quanex Building Products might even raise payments in the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Quanex Building Products (2 are a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.