Worthington Industries' (NYSE:WOR) Shareholders Will Receive A Bigger Dividend Than Last Year

Worthington Industries, Inc. (NYSE:WOR) will increase its dividend on the 29th of June to US$0.28. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

View our latest analysis for Worthington Industries

Worthington Industries' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Worthington Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 56.6% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 22%, which is comfortable for the company to continue in the future.

Worthington Industries 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 US$0.40 in 2011 to the most recent annual payment of US$1.12. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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. Worthington Industries has seen EPS rising for the last five years, at 45% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Worthington Industries' Dividend

Overall, a dividend increase is always good, and we think that Worthington Industries is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Worthington Industries (2 are concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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