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

Douglas Dynamics, Inc. (NYSE:PLOW) has announced that it will pay a dividend of $0.295 per share on the 30th of September. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Douglas Dynamics

Douglas Dynamics' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 96% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 53%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to grow by 29.0% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

Douglas Dynamics Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.83 in 2014, and the most recent fiscal year payment was $1.18. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Douglas Dynamics' EPS has fallen by approximately 11% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Douglas Dynamics' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've picked out 2 warning signs for Douglas Dynamics that investors should know about before committing capital to this stock. 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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