The board of Dana Incorporated (NYSE:DAN) has announced that it will pay a dividend on the 21st of March, with investors receiving $0.10 per share. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dana's stock price has increased by 105% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Dana

Dana's Future Dividend Projections Seem Positive

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This is quite a strong warning sign that the dividend may not be sustainable.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, so there isn't too much pressure on the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.20 in 2015 to the most recent total annual payment of $0.40. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dana's EPS has fallen by approximately 46% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Dana's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Dana make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Dana that investors need to be conscious of moving forward. Is Dana 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.