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Terex Corporation (NYSE:TEX) has announced that it will pay a dividend of $0.17 per share on the 20th of June. Based on this payment, the dividend yield will be 1.4%, which is fairly typical for the industry.
Terex's Future Dividend Projections Appear Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Terex's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 57.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Terex
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.20 in 2015, and the most recent fiscal year payment was $0.68. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Terex has grown earnings per share at 16% per year over the past five years. Terex definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Terex Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Terex might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Terex has 2 warning signs (and 1 which is potentially serious) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.