Yahoo Finance Otis Worldwide (NYSE:OTIS) Is Increasing Its Dividend To $0.39
The board of Otis Worldwide Corporation (NYSE:OTIS) has announced that the dividend on 7th of June will be increased to $0.39, which will be 15% higher than last year's payment of $0.34 which covered the same period. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.
See our latest analysis for Otis Worldwide
Otis Worldwide's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Otis Worldwide's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 33.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.
Otis Worldwide Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 4 years was $0.80 in 2020, and the most recent fiscal year payment was $1.36. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
We Could See Otis Worldwide's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Otis Worldwide has been growing its earnings per share at 7.8% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On Otis Worldwide's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Otis Worldwide (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.
