If you are interested in cashing in on The Timken Company’s (NYSE:TKR) upcoming dividend of US$0.28 per share, you only have 2 days left to buy the shares before its ex-dividend date, 16 August 2018, in time for dividends payable on the 05 September 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Timken’s most recent financial data to examine its dividend characteristics in more detail.
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Timken fit our criteria?
Timken has a trailing twelve-month payout ratio of 33.31%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 23.76%, leading to a dividend yield of 2.38%. However, EPS should increase to $4.39, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Although TKR’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Timken generates a yield of 2.32%, which is high for Machinery stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Timken as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for TKR’s future growth? Take a look at our free research report of analyst consensus for TKR’s outlook.
- Valuation: What is TKR 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 TKR is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.