Otis Worldwide (NYSE:OTIS) Is Increasing Its Dividend To US$0.24

Otis Worldwide Corporation's (NYSE:OTIS) dividend will be increasing to US$0.24 on 10th of June. This takes the annual payment to 1.1% of the current stock price, which is about average for the industry.

See our latest analysis for Otis Worldwide

Otis Worldwide'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, Otis Worldwide's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 17.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Otis Worldwide Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Otis Worldwide Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Otis Worldwide's earnings per share is up 4.1% over the past year. Rising earnings will make it easier for the company to keep paying dividends, and possibly even increase them. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Otis Worldwide (1 is significant!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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