Allison Transmission Holdings (NYSE:ALSN) Is Paying Out A Larger Dividend Than Last Year
Allison Transmission Holdings, Inc. (NYSE:ALSN) will increase its dividend on the 15th of March to $0.25, which is 8.7% higher than last year's payment from the same period of $0.23. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
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. Investors will be pleased to see that Allison Transmission Holdings' stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Allison Transmission Holdings
Allison Transmission Holdings' Payment Has Solid Earnings Coverage
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, Allison Transmission Holdings' earnings easily 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 31.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.9% by next year, which is in a pretty sustainable range.
Allison Transmission Holdings Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.48, compared to the most recent full-year payment of $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Allison Transmission Holdings has been growing its earnings per share at 9.9% a year over the past five years. Allison Transmission Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Allison Transmission Holdings 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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Allison Transmission Holdings that investors should take into consideration. 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.
