Douglas Dynamics (NYSE:PLOW) Is Due To Pay A Dividend Of $0.295
The board of Douglas Dynamics, Inc. (NYSE:PLOW) has announced that it will pay a dividend of $0.295 per share on the 30th of June. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Douglas Dynamics
Douglas Dynamics' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Douglas Dynamics' dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.
Over the next year, EPS is forecast to expand by 35.7%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 72% which brings it into quite a comfortable range.
Douglas Dynamics Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.82 in 2013 to the most recent total annual payment of $1.18. This means that it has been growing its distributions at 3.7% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Douglas Dynamics' earnings per share has shrunk at 13% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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 becomes a long term trend.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Douglas Dynamics that investors need to be conscious of moving forward. Is Douglas Dynamics 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.
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