BorgWarner Inc. (NYSE:BWA) will pay a dividend of $0.17 on the 15th of March. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders’ returns.
See our latest analysis for BorgWarner
BorgWarner’s Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, BorgWarner was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 61.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.
BorgWarner Doesn’t Have A Long Payment History
The dividend’s track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the dividend has gone from $0.50 total annually to $0.68. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. It’s good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn’t want to depend on this dividend too heavily.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It’s encouraging to see that BorgWarner has been growing its earnings per share at 14% a year over the past five years. BorgWarner definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
BorgWarner Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don’t think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we’ve picked out 1 warning sign for BorgWarner that investors should take into consideration. 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.
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