Owens Corning (NYSE:OC) Is Paying Out A Larger Dividend Than Last Year

The board of Owens Corning (NYSE:OC) has announced that the dividend on 19th of January will be increased to $0.52, which will be 49% higher than last year's payment of $0.35 which covered the same period. This makes the dividend yield about the same as the industry average at 1.5%.

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Owens Corning's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Owens Corning's 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.

Looking forward, earnings per share is forecast to fall by 26.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 16%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Owens Corning Doesn't Have A Long Payment History

Owens Corning's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.64 in 2013 to the most recent total annual payment of $1.40. This means that it has been growing its distributions at 9.1% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Owens Corning to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Owens Corning has grown earnings per share at 34% per year over the past five years. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Owens Corning you should be aware of, and 1 of them can't be ignored. Is Owens Corning not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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