On the 04 June 2018, The Timken Company (NYSE:TKR) will be paying shareholders an upcoming dividend amount of $0.28 per share. However, investors must have bought the company’s stock before 17 May 2018 in order to qualify for the payment. That means you have only 3 days left! Is this future income a persuasive enough catalyst for investors to think about Timken as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. See our latest analysis for Timken
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Timken fit our criteria?
Timken has a trailing twelve-month payout ratio of 34.21%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 24.92%, leading to a dividend yield of around 2.53%. However, EPS should increase to $3.97, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time. Relative to peers, Timken generates a yield of 2.33%, which is high for Machinery stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Timken is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for TKR’s future growth? Take a look at our free research report of analyst consensus for TKR’s outlook.
- Valuation: What is TKR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TKR is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.