GATX (NYSE:GATX) Has Announced That It Will Be Increasing Its Dividend To $0.58
GATX Corporation (NYSE:GATX) will increase its dividend on the 31st of March to $0.58, which is 5.5% higher than last year's payment from the same period of $0.55. This makes the dividend yield about the same as the industry average at 1.8%.
Check out our latest analysis for GATX
GATX's Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. GATX is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Looking forward, earnings per share is forecast to rise by 12.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.
GATX Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $1.24 total annually to $2.20. This implies that the company grew its distributions at a yearly rate of about 5.9% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
GATX Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that GATX has been growing its earnings per share at 7.6% a year over the past five years. GATX definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
Overall, we always like to see the dividend being raised, but we don't think GATX will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, GATX has 3 warning signs (and 1 which is potentially serious) we think you should know about. Is GATX 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.
