BorgWarner Inc.’s (NYSE:BWA) investors are due to receive a payment of $0.17 per share on 15th of June. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.
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. However, BorgWarner’s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 76.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.7% by next year, which is in a pretty sustainable range.
BorgWarner Has A Solid Track Record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2013, the dividend has gone from $0.50 total annually to $0.68. This means that it has been growing its distributions at 3.1% 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. BorgWarner has seen EPS rising for the last five years, at 13% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for BorgWarner’s prospects of growing its dividend payments in the future.
BorgWarner Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think BorgWarner might even raise payments in the future. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we’ve identified 2 warning signs for BorgWarner that investors need to be conscious of moving forward. 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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