Yahoo Finance Trinity Industries (NYSE:TRN) Is Increasing Its Dividend To $0.26
Trinity Industries, Inc. (NYSE:TRN) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of April to $0.26. This makes the dividend yield 4.4%, which is above the industry average.
See our latest analysis for Trinity Industries
Trinity Industries' Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Trinity Industries' dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. This is a pretty unsustainable practice, and could be risky if continued for the long term.
Earnings per share is forecast to rise by 25.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.
Trinity Industries 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 $0.22 total annually to $1.04. This means that it has been growing its distributions at 17% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Trinity Industries' earnings per share has shrunk at 23% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Trinity Industries' Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Trinity Industries' payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Trinity Industries has 3 warning signs (and 2 which are a bit concerning) we think 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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