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Winnebago Industries, Inc. (NYSE:WGO) has announced that it will be increasing its periodic dividend on the 28th of September to $0.27, which will be 50% higher than last year's comparable payment amount of $0.18. This takes the annual payment to 1.1% of the current stock price, which unfortunately is below what the industry is paying.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Winnebago Industries' stock price has increased by 46% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Winnebago Industries
Winnebago Industries' Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Winnebago Industries' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 28.8%. If the dividend continues along recent trends, we estimate the payout ratio could be 9.8%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Winnebago Industries Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the dividend has gone from $0.36 total annually to $0.72. This means that it has been growing its distributions at 9.1% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Winnebago Industries to be a consistent dividend paying stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Winnebago Industries has seen EPS rising for the last five years, at 44% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Winnebago Industries' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.