Otis Worldwide (NYSE:OTIS) Will Pay A Larger Dividend Than Last Year At US$0.29

Simply Wall St
·2 min read

Otis Worldwide Corporation (NYSE:OTIS) has announced that it will be increasing its dividend on the 10th of June to US$0.29, which will be 21% higher than last year. The announced payment will take the dividend yield to 1.4%, which is in line with the average for the industry.

View our latest analysis for Otis Worldwide

Otis Worldwide's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Otis Worldwide's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 9.7% 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.

historic-dividend
historic-dividend

Otis Worldwide Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from US$0.80 in 2020 to the most recent annual payment of US$0.96. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. Otis Worldwide has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Otis Worldwide has seen EPS rising for the last three years, at 6.8% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Otis Worldwide's prospects of growing its dividend payments in the future.

Our Thoughts On Otis Worldwide's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Otis Worldwide (of which 1 can't be ignored!) you should know about. Is Otis Worldwide not quite the opportunity you were looking for? Why not check out our selection of top 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.