Tennant Company (NYSE:TNC) is planning to increase its dividend to $0.28 on December 15th, a move that comes despite its yield being below the industry average at 1.4%. The firm's earnings, which comfortably cover the dividend, indicate that a substantial share of profits is being reinvested for growth.
Public analyst estimates suggest that companies growing earnings often make the best long-term dividend stocks. Tennant has consistently paid dividends with minimal fluctuation since 2013, raising the annual figure from $0.72 to $1.12. This translates to a compound annual growth rate (CAGR) of 4.5%. Although this represents slow growth, the consistency of dividends may be appealing to investors.
In addition to its consistent dividend policy, Tennant has demonstrated an impressive 34% annual EPS growth rate over the past five years. With its low payout ratio, Tennant could emerge as a strong dividend payer in the long term.
Looking forward, analysts are forecasting a 15.9% EPS rise in the next year for Tennant. If the current dividend growth trajectory continues, this could lead to a sustainable payout ratio of 18% by next year.
The company's ability to cover dividends with earnings and convert these into cash flows positions it as an attractive income stock for investors who favor firms with stable dividend policies.
InvestingPro Insights
The InvestingPro data and tips suggest a positive outlook for Tennant Company (NYSE:TNC). The company's market cap stands at a substantial 1510 million USD, with a P/E ratio of 14.61, indicating a reasonable valuation relative to its earnings. The P/E Ratio, adjusted for the last twelve months as of Q3 2023, is also favorable at 14.01, further supporting the company's investment case.
Impressively, Tennant has experienced a revenue growth of 13.51% over the last twelve months as of Q3 2023, aligning with InvestingPro Tip 0 that highlights the company's accelerating revenue growth. Additionally, the company's 1 Week Price Total Return as of 2023 stands at 10.3%, echoing InvestingPro Tip about the significant return over the last week.
InvestingPro Tip also emphasizes the company's strong dividend history, having raised its dividend for 31 consecutive years. This is consistent with the article's focus on Tennant's consistent dividend policy and its potential as a strong dividend payer in the long term.
For those seeking more insights, InvestingPro offers 12 additional tips for Tennant Company, providing further valuable information for potential investors.
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