Otter Tail (NASDAQ:OTTR) Is Paying Out A Larger Dividend Than Last Year
Otter Tail Corporation (NASDAQ:OTTR) will increase its dividend from last year's comparable payment on the 8th of March to $0.4675. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.
See our latest analysis for Otter Tail
Otter Tail's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Otter Tail was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 42.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 48%, which is comfortable for the company to continue in the future.
Otter Tail Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.19 in 2014, and the most recent fiscal year payment was $1.87. This means that it has been growing its distributions at 4.6% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Otter Tail has impressed us by growing EPS at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Otter Tail Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Otter Tail (1 makes us a bit uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
