D.R. Horton (NYSE:DHI) Will Pay A Larger Dividend Than Last Year At $0.25

D.R. Horton, Inc.'s (NYSE:DHI) dividend will be increasing from last year's payment of the same period to $0.25 on 10th of May. This takes the annual payment to 0.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for D.R. Horton

D.R. Horton's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, D.R. Horton's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 16.0%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 8.9%, which we are pretty comfortable with and we think is feasible on an earnings basis.

D.R. Horton Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $0.15, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 21% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. D.R. Horton has seen EPS rising for the last five years, at 38% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

D.R. Horton 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 earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for D.R. Horton (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.