Assessing the Sustainability of Otis Worldwide Corp's Upcoming Dividend
Otis Worldwide Corp(OTIS, Financial) recently announced a dividend of $0.34 per share, payable on 2024-03-08, with the ex-dividend date set for 2024-02-15. 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 Otis Worldwide Corp's dividend performance and assess its sustainability.
What Does Otis Worldwide Corp Do?
Otis is the largest global elevator and escalator supplier by revenue with around 18% global market share. In 1854 Otis' founder and namesake Elisha Graves Otis, invented a safety mechanism that prevented elevators from falling if the hoisting cable failed. The company's product and service lifecycle begins with installations of elevator units in new buildings, later selling maintenance services on the units, and eventually replacement of the units after the average 15- to 20-year useful life of an elevator. As the largest global OEM, Otis has amassed an installed base under service that exceeds 2 million elevators. Its business model is similar to that of its closest competitors Kone, Schindler, and TK Elevator.
A Glimpse at Otis Worldwide Corp's Dividend History
Otis Worldwide Corp has maintained a consistent dividend payment record since 2020. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Otis Worldwide Corp's Dividend Yield and Growth
As of today, Otis Worldwide Corp currently has a 12-month trailing dividend yield of 1.44% and a 12-month forward dividend yield of 1.51%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Otis Worldwide Corp's annual dividend growth rate was 29.70%. Based on Otis Worldwide Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Otis Worldwide Corp stock as of today is approximately 1.44%.
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, Otis Worldwide Corp's dividend payout ratio is 0.37.
Otis Worldwide Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Otis Worldwide Corp's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 7 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Otis Worldwide Corp's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Otis Worldwide Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Otis Worldwide Corp's revenue has increased by approximately 5.30% per year on average, a rate that underperforms approximately 55.43% 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, Otis Worldwide Corp's earnings increased by approximately 19.40% per year on average, a rate that underperforms approximately 38.59% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 7.90%, which underperforms approximately 50.24% of global competitors.
Next Steps
In conclusion, Otis Worldwide Corp's upcoming dividend, consistent dividend history, and a reasonable payout ratio paint a picture of a reliable dividend-paying stock. However, the company's growth metrics, while solid, suggest a need for a cautious assessment of future dividend sustainability. Investors should weigh Otis Worldwide Corp's moderate dividend yield against its growth prospects and profitability, which are essential for long-term dividend health. As the company navigates the competitive landscape of the elevator and escalator industry, will its strategic initiatives and market position enable it to continue rewarding shareholders with dividends? That's an important question for value investors to consider. For those looking to expand their portfolio with dividend-paying stocks, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
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.
