It looks like Oshkosh Corporation (NYSE:OSK) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 13th of November to receive the dividend, which will be paid on the 30th of November.
Oshkosh’s next dividend payment will be US$0.33 per share, and in the last 12 months, the company paid a total of US$1.32 per share. Calculating the last year’s worth of payments shows that Oshkosh has a trailing yield of 1.9% on the current share price of $68.56. If you buy this business for its dividend, you should have an idea of whether Oshkosh’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
Check out our latest analysis for Oshkosh
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Oshkosh’s payout ratio is modest, at just 26% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Oshkosh’s earnings per share have been growing at 10% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past seven years, Oshkosh has increased its dividend at approximately 12% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Should investors buy Oshkosh for the upcoming dividend? Oshkosh has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Oshkosh looks solid on this analysis overall, and we’d definitely consider investigating it more closely.
So while Oshkosh looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. To help with this, we’ve discovered 3 warning signs for Oshkosh that you should be aware of before investing in their shares.
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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