Timken's (NYSE:TKR) Dividend Will Be Increased To $0.34

The Timken Company (NYSE:TKR) will increase its dividend on the 28th of May to $0.34, which is 3.0% higher than last year's payment from the same period of $0.33. This makes the dividend yield about the same as the industry average at 1.5%.

View our latest analysis for Timken

Timken's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Timken's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 37.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Timken 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 $0.92 total annually to $1.32. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Timken Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Timken has impressed us by growing EPS at 5.4% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Timken's prospects of growing its dividend payments in the future.

Timken Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Timken that investors should know about before committing capital to this stock. Is Timken 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.