Eaton Corp PLC's Dividend Analysis
A Comprehensive Examination of Eaton Corp PLC's Dividend Performance and Sustainability
Eaton Corp PLC (NYSE:ETN) recently announced a dividend of $0.86 per share, payable on 2023-11-24, with the ex-dividend date set for 2023-11-03. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into Eaton Corp PLC's dividend performance and assess its sustainability.
Company Overview: What Does Eaton Corp PLC Do?
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Eaton Corp PLC is a diversified power management company with over a century of operational history. The company operates through various segments, including electrical Americas, electrical global, aerospace, vehicle, and eMobility. Eaton's portfolio can broadly be divided into two halves. One part of its portfolio is housed under its industrial sector umbrella, which serves a large variety of end markets like commercial vehicles, general aviation, and trucks. The other portion is Eaton's electrical sector portfolio, which serves data centers, utilities, and the residential end market, among others. Despite its Ireland domicile offering favorable tax treatment, most of its operations are in the U.S.
A Glimpse at Eaton Corp PLC's Dividend History
Eaton Corp PLC has maintained a consistent dividend payment record since 1986, with dividends currently distributed on a quarterly basis. The company has increased its dividend each year since 1986, earning it the status of a dividend aristocrat, a title bestowed on companies that have increased their dividend each year for at least the past 37 years.
Breaking Down Eaton Corp PLC's Dividend Yield and Growth
As of today, Eaton Corp PLC currently has a 12-month trailing dividend yield of 1.57% and a 12-month forward dividend yield of 1.59%, suggesting an expected increase in dividend payments over the next 12 months.
Over the past three years, Eaton Corp PLC's annual dividend growth rate was 4.50%. Over a five-year horizon, this rate increased to 5.70% per year, and over the past decade, Eaton Corp PLC's annual dividends per share growth rate stands at 7.60%. Based on Eaton Corp PLC's dividend yield and five-year growth rate, the 5-year yield on cost of Eaton Corp PLC stock as of today is approximately 2.07%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Eaton Corp PLC's dividend payout ratio is 0.49.
Eaton Corp PLC's profitability rank of 7 out of 10 as of 2023-09-30 suggests good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
Eaton Corp PLC's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Eaton Corp PLC's earnings increased by approximately 5.40% per year on average. However, the company's 5-year EBITDA growth rate of -1.60% underperforms approximately 74.06% of global competitors.
Conclusion
Based on Eaton Corp PLC's dividend payments, growth rate, payout ratio, profitability, and growth metrics, it appears the company maintains a sustainable dividend policy. The consistent increase in dividends, coupled with a moderate payout ratio and good profitability rank, suggests a promising outlook for dividend-focused investors. However, the company's underperformance in EBITDA growth relative to global competitors warrants attention. Investors should consider these factors and their individual risk tolerance when evaluating Eaton Corp PLC as a potential investment.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
