Douglas Dynamics (NYSE:PLOW) Is Due To Pay A Dividend Of $0.295

The board of Douglas Dynamics, Inc. (NYSE:PLOW) has announced that it will pay a dividend of $0.295 per share on the 28th of June. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Douglas Dynamics

Douglas Dynamics' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 97% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 70%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to grow by 27.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

Douglas Dynamics Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.83 total annually to $1.18. This means that it has been growing its distributions at 3.6% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Douglas Dynamics has seen earnings per share falling at 9.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Douglas Dynamics' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Douglas Dynamics (of which 1 is concerning!) you should know about. Is Douglas Dynamics 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.