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

Quanex Building Products Corporation's (NYSE:NX) investors are due to receive a payment of $0.08 per share on 30th of September. Based on this payment, the dividend yield will be 1.6%, which is fairly typical for the industry.

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Quanex Building Products' Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Quanex Building Products' dividend made up quite a large proportion of earnings but only 68% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 79.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for Quanex Building Products

Quanex Building Products Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.16 in 2015, and the most recent fiscal year payment was $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 Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Quanex Building Products has impressed us by growing EPS at 9.8% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, a consistent dividend is a good thing, and we think that Quanex Building Products has the ability to continue this into the future. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Quanex Building Products (1 makes us a bit uncomfortable!) 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.