Douglas Dynamics (NYSE:PLOW) Is Paying Out A Dividend Of $0.295

Douglas Dynamics, Inc. (NYSE:PLOW) will pay a dividend of $0.295 on the 30th of June. The dividend yield will be 3.9% based on this payment which is still above the industry average.

See our latest analysis for Douglas Dynamics

Douglas Dynamics' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to expand by 35.7%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 72% which brings it into quite a comfortable range.

Douglas Dynamics Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.82 in 2013 to the most recent total annual payment of $1.18. This means that it has been growing its distributions at 3.7% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Douglas Dynamics' EPS has declined at around 13% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Douglas Dynamics' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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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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.