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Oshkosh Corporation (NYSE:OSK) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Therefore, if you purchase Oshkosh's shares on or after the 16th of May, you won't be eligible to receive the dividend, when it is paid on the 30th of May.
The company's next dividend payment will be US$0.51 per share, and in the last 12 months, the company paid a total of US$2.04 per share. Last year's total dividend payments show that Oshkosh has a trailing yield of 2.2% on the current share price of US$92.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Oshkosh has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether Oshkosh generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.
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.
See our latest analysis for Oshkosh
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Oshkosh earnings per share are up 3.8% per annum over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.