Owens Corning (NYSE:OC) Has Announced That It Will Be Increasing Its Dividend To $0.52

The board of Owens Corning (NYSE:OC) has announced that it will be paying its dividend of $0.52 on the 19th of January, an increased payment from last year's comparable dividend. This makes the dividend yield 2.4%, which is above the industry average.

View our latest analysis for Owens Corning

Owens Corning's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Owens Corning's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 26.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 16%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Owens Corning Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2013, the dividend has gone from $0.64 total annually to $2.08. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Owens Corning has seen EPS rising for the last five years, at 34% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Owens Corning's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 of these factors considered, we think this has solid potential as a dividend 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 4 warning signs for Owens Corning (1 can't be ignored!) 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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