Ethan Allen Interiors Inc. (NYSE:ETH) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 8.8% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Ethan Allen Interiors in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- 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?
Does Ethan Allen Interiors pass our checks?
The current trailing twelve-month payout ratio for the stock is 58%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 53% which, assuming the share price stays the same, leads to a dividend yield of around 4.4%. Moreover, EPS should increase to $1.5.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. ETH has increased its DPS from $0.40 to $1.76 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes ETH a true dividend rockstar.
Relative to peers, Ethan Allen Interiors has a yield of 8.8%, which is high for Consumer Durables stocks.
Considering the dividend attributes we analyzed above, Ethan Allen Interiors is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ETH’s future growth? Take a look at our free research report of analyst consensus for ETH’s outlook.
- Valuation: What is ETH 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 ETH 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.