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BorgWarner (NYSE:BWA) Is Due To Pay A Dividend Of US$0.17

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  • BWA

The board of BorgWarner Inc. (NYSE:BWA) has announced that it will pay a dividend on the 15th of December, with investors receiving US$0.17 per share. This payment means that the dividend yield will be 1.4%, which is around the industry average.

See our latest analysis for BorgWarner

BorgWarner's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, BorgWarner was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 23.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

BorgWarner Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2013, the dividend has gone from US$0.50 to US$0.68. This means that it has been growing its distributions at 3.9% per annum over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

BorgWarner Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see BorgWarner has been growing its earnings per share at 5.2% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for BorgWarner's prospects of growing its dividend payments in the future.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for BorgWarner that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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