- Oops!Something went wrong.Please try again later.
The board of Quaker Chemical Corporation (NYSE:KWR) has announced that it will be increasing its dividend on the 31st of January to US$0.41. Despite this raise, the dividend yield of 0.7% is only a modest boost to shareholder returns.
Quaker Chemical's Earnings Easily Cover the Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Quaker Chemical 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.
EPS is set to fall by 4.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Quaker Chemical Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.94 in 2012, and the most recent fiscal year payment was US$1.66. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Quaker Chemical has grown earnings per share at 15% per year over the past five years. Quaker Chemical definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Quaker Chemical's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. For example, we've identified 2 warning signs for Quaker Chemical (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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.