The board of Gentex Corporation (NASDAQ:GNTX) has announced that it will pay a dividend of US$0.12 per share on the 19th of January. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.
Gentex's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Gentex's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 4.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.
Gentex Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.24, compared to the most recent full-year payment of US$0.48. This means that it has been growing its distributions at 7.2% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. Gentex has seen EPS rising for the last five years, at 7.8% per annum. Gentex definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Gentex Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Gentex for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.