Thor Industries (NYSE:THO) Could Be A Buy For Its Upcoming Dividend
Thor Industries, Inc. (NYSE:THO) is about to trade ex-dividend in the next two days. You can purchase shares before the 31st of December in order to receive the dividend, which the company will pay on the 18th of January.
Thor Industries's next dividend payment will be US$0.41 per share, on the back of last year when the company paid a total of US$1.64 to shareholders. Based on the last year's worth of payments, Thor Industries stock has a trailing yield of around 1.6% on the current share price of $102.37. If you buy this business for its dividend, you should have an idea of whether Thor Industries's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Thor Industries
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Thor Industries paid out a comfortable 31% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 21% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Thor Industries, with earnings per share up 6.4% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Thor Industries has lifted its dividend by approximately 19% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Thor Industries worth buying for its dividend? Earnings per share growth has been growing somewhat, and Thor Industries is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Thor Industries is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Thor Industries, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Thor Industries is facing. In terms of investment risks, we've identified 2 warning signs with Thor Industries and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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