Otis Worldwide Corporation (NYSE:OTIS) Looks Interesting, And It's About To Pay A Dividend
It looks like Otis Worldwide Corporation (NYSE:OTIS) is about to go ex-dividend in the next 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Otis Worldwide's shares on or after the 13th of November, you won't be eligible to receive the dividend, when it is paid on the 11th of December.
The company's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.76 per share. Last year's total dividend payments show that Otis Worldwide has a trailing yield of 2.2% on the current share price of US$78.96. 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 investigate whether Otis Worldwide can afford its dividend, and if the dividend could grow.
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. Otis Worldwide paid out a comfortable 43% of its profit last year. 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. Fortunately, it paid out only 40% of its free cash flow in the past year.
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 Otis Worldwide
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Otis Worldwide's earnings per share have been growing at 14% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Otis Worldwide has lifted its dividend by approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Has Otis Worldwide got what it takes to maintain its dividend payments? Otis Worldwide has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Otis Worldwide, and we would prioritise taking a closer look at it.
In light of that, while Otis Worldwide has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Otis Worldwide that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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