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Allison Transmission Holdings (NYSE:ALSN) Has Announced That It Will Be Increasing Its Dividend To US$0.21

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Allison Transmission Holdings, Inc.'s (NYSE:ALSN) dividend will be increasing on the 18th of March to US$0.21, with investors receiving 11% more than last year. Based on the announced payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

Check out our latest analysis for Allison Transmission Holdings

Allison Transmission Holdings' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Allison Transmission Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 24.1%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

Allison Transmission Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.24 in 2012 to the most recent annual payment of US$0.76. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Allison Transmission Holdings has been growing its earnings per share at 29% a year over the past five years. 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.

We Really Like Allison Transmission Holdings' Dividend

Overall, a dividend increase is always good, and we think that Allison Transmission Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Allison Transmission Holdings that investors should know about before committing capital to this stock. 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.