Otis Worldwide (NYSE:OTIS) Is Paying Out A Larger Dividend Than Last Year

Otis Worldwide Corporation (NYSE:OTIS) has announced that it will be increasing its periodic dividend on the 7th of June to $0.39, which will be 15% higher than last year's comparable payment amount of $0.34. This makes the dividend yield about the same as the industry average at 1.5%.

See our latest analysis for Otis Worldwide

Otis Worldwide's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Otis Worldwide was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 34.2%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Otis Worldwide Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of $0.80 in 2020 to the most recent total annual payment of $1.36. This means that it has been growing its distributions at 14% per annum 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.

We Could See Otis Worldwide's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Otis Worldwide has been growing its earnings per share at 7.8% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Otis Worldwide you should be aware of, and 1 of them makes us a bit uncomfortable. Is Otis Worldwide not quite the opportunity you were looking for? Why not check out our selection of top 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.