Assessing the Sustainability and Growth of Parker Hannifin Corp's Dividends
Parker Hannifin Corp (PH, Financial) recently announced a dividend of $1.48 per share, payable on 2024-03-01, with the ex-dividend date set for 2024-02-08. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Parker Hannifin Corp's dividend performance and assess its sustainability.
What Does Parker Hannifin Corp Do?
Parker Hannifin is an industrial conglomerate operating through two segments: diversified industrial, which serves a variety of end markets, and aerospace systems, which sells engine and actuation components. The diversified industrial segment consists of six groups, including engineered materials (sealing devices), filtration (filters and systems monitoring and removing contaminants from liquids and gases), fluid connectors (valves, couplings, and other fittings), instrumentation (flow manufacturing components and fluid control applications), and motion systems (hydraulic, pneumatic, and electromechanical components in industrial machinery and equipment). The segment boasts 17,100 independent distributors, and about 40% of its business occurs outside the United States.
A Glimpse at Parker Hannifin Corp's Dividend History
Parker Hannifin Corp has maintained a consistent dividend payment record since 1957. Dividends are currently distributed on a quarterly basis.
Parker Hannifin Corp has increased its dividend each year since 1957. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 67 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Parker Hannifin Corp's Dividend Yield and Growth
As of today, Parker Hannifin Corp currently has a 12-month trailing dividend yield of 1.13% and a 12-month forward dividend yield of 1.16%. This suggests an expectation of increased dividend payments over the next 12 months.
Parker Hannifin Corp's dividend yield of 1.13% is near a 10-year low and underperforms than 70.33% of global competitors in the Industrial Products industry, suggesting that the company's dividend yield may not be a compelling proposition for income investors.
Over the past three years, Parker Hannifin Corp's annual dividend growth rate was 15.80%. Extended to a five-year horizon, this rate decreased to 13.70% per year. And over the past decade, Parker Hannifin Corp's annual dividends per share growth rate stands at an impressive 11.00%.
Based on Parker Hannifin Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Parker Hannifin Corp stock as of today is approximately 2.15%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Parker Hannifin Corp's dividend payout ratio is 0.25.
Parker Hannifin Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Parker Hannifin Corp's profitability 9 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Parker Hannifin Corp's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Parker Hannifin Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Parker Hannifin Corp's revenue has increased by approximately 11.70% per year on average, a rate that outperforms than approximately 64.39% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Parker Hannifin Corp's earnings increased by approximately 32.60% per year on average, a rate that outperforms than approximately 75.36% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 20.30%, which outperforms than approximately 73.8% of global competitors.
Next Steps
In conclusion, Parker Hannifin Corp's long-standing history of dividend payments, consistent dividend growth, manageable payout ratio, strong profitability, and solid growth metrics collectively indicate a positive outlook for the company's dividend sustainability. While the current yield may not be the highest in the industry, the company's commitment to increasing dividends and its potential for future growth should be attractive to value investors. With a diversified business model and a robust financial performance, Parker Hannifin Corp appears well-positioned to continue rewarding shareholders with reliable dividends. Investors seeking to diversify their income-generating portfolio might consider Parker Hannifin Corp as a potential candidate, keeping in mind the broader industry trends and company-specific factors that could influence future dividend payments.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
