Income Investors Should Know That Douglas Dynamics, Inc. (NYSE:PLOW) Goes Ex-Dividend Soon

It looks like Douglas Dynamics, Inc. (NYSE:PLOW) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Douglas Dynamics' shares before the 15th of September to receive the dividend, which will be paid on the 30th of September.

The company's next dividend payment will be US$0.295 per share, and in the last 12 months, the company paid a total of US$1.18 per share. Based on the last year's worth of payments, Douglas Dynamics stock has a trailing yield of around 2.9% on the current share price of US$40.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Douglas Dynamics is paying out an acceptable 53% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 58% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Douglas Dynamics's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Douglas Dynamics

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Douglas Dynamics's earnings per share have been growing at 12% a year for the past five years. Douglas Dynamics is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Douglas Dynamics has delivered an average of 2.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Douglas Dynamics is keeping back more of its profits to grow the business.

Final Takeaway

Is Douglas Dynamics an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Douglas Dynamics's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 53% and 58% respectively. To summarise, Douglas Dynamics looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Douglas Dynamics is facing. For example - Douglas Dynamics has 2 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.