Yahoo Finance Tennant's (NYSE:TNC) Upcoming Dividend Will Be Larger Than Last Year's
The board of Tennant Company (NYSE:TNC) has announced that it will be paying its dividend of $0.265 on the 15th of December, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 1.7%, which is in line with the average for the industry.
Check out our latest analysis for Tennant
Tennant's Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Tennant was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 66.0%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.
Tennant Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $0.68 total annually to $1.06. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year 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. It's encouraging to see that Tennant has been growing its earnings per share at 31% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Tennant will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Tennant (of which 1 makes us a bit uncomfortable!) you should know about. 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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