Parker-Hannifin Corporation (NYSE:PH) Passed Our Checks, And It's About To Pay A US$1.63 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Parker-Hannifin Corporation (NYSE:PH) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Parker-Hannifin's shares on or after the 8th of November will not receive the dividend, which will be paid on the 6th of December.

The company's next dividend payment will be US$1.63 per share, and in the last 12 months, the company paid a total of US$6.52 per share. Based on the last year's worth of payments, Parker-Hannifin has a trailing yield of 1.0% on the current stock price of US$635.03. If you buy this business for its dividend, you should have an idea of whether Parker-Hannifin's dividend is reliable and sustainable. As a result, readers should always check whether Parker-Hannifin has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Parker-Hannifin

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Parker-Hannifin paid out a comfortable 28% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Parker-Hannifin's earnings per share have been growing at 14% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Parker-Hannifin has delivered 13% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Parker-Hannifin got what it takes to maintain its dividend payments? Parker-Hannifin has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Parker-Hannifin looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Parker-Hannifin looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Parker-Hannifin and you should be aware of these before buying any shares.

If you're in the market for strong dividend payers, we recommend checking 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.