Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the last few years Wabash National Corporation (NYSE:WNC) has paid a dividend to shareholders. Today it yields 2.4%. Does Wabash National tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
Does Wabash National pass our checks?
Wabash National has a trailing twelve-month payout ratio of 25%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect WNC’s payout to remain around the same level at 27% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.9%. Furthermore, EPS should increase to $1.57.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Wabash National as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Wabash National generates a yield of 2.4%, which is high for Machinery stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about Wabash National from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WNC’s future growth? Take a look at our free research report of analyst consensus for WNC’s outlook.
- Valuation: What is WNC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WNC is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.