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Interested In Douglas Dynamics' (NYSE:PLOW) Upcoming US$0.28 Dividend? You Have Three Days Left

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Douglas Dynamics, Inc. (NYSE:PLOW) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Douglas Dynamics investors that purchase the stock on or after the 16th of September will not receive the dividend, which will be paid on the 30th of September.

The company's next dividend payment will be US$0.28 per share. Last year, in total, the company distributed US$1.14 to shareholders. Based on the last year's worth of payments, Douglas Dynamics has a trailing yield of 3.0% on the current stock price of $38.21. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Douglas Dynamics can afford its dividend, and if the dividend could grow.

See our latest analysis for Douglas Dynamics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Douglas Dynamics paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Douglas Dynamics generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 45% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Douglas Dynamics's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Douglas Dynamics's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Douglas Dynamics has increased its dividend at approximately 4.6% a year on average.

Final Takeaway

Has Douglas Dynamics got what it takes to maintain its dividend payments? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, Douglas Dynamics doesn't stand out from a dividend perspective. All things considered, we are not particularly enthused about Douglas Dynamics from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Douglas Dynamics, you should know about the other risks facing this business. Our analysis shows 1 warning sign for Douglas Dynamics and you should be aware of this before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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