Worthington Steel (NYSE:WS) Will Pay A Dividend Of $0.16

Worthington Steel, Inc.'s (NYSE:WS) investors are due to receive a payment of $0.16 per share on 28th of March. Based on this payment, the dividend yield will be 2.4%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Worthington Steel's stock price has reduced by 40% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Worthington Steel

Worthington Steel's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Worthington Steel was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 25.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

Worthington Steel Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past three years, it looks as though Worthington Steel's EPS has declined at around 8.3% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Worthington Steel stock. Is Worthington Steel 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.