Harley-Davidson, Inc.'s (NYSE:HOG) investors are due to receive a payment of $0.1575 per share on 22nd of September. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.
Harley-Davidson's Earnings Easily Cover The Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Harley-Davidson was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 34.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.5% by next year, which is in a pretty sustainable range.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from $0.50 total annually to $0.63. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth May Be Hard To Achieve
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Harley-Davidson has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Harley-Davidson's Dividend
Overall, a consistent dividend is a good thing, and we think that Harley-Davidson has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
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. Just as an example, we've come across 2 warning signs for Harley-Davidson you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield 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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