The board of Wabash National Corporation (NYSE:WNC) has announced that it will pay a dividend of $0.08 per share on the 24th of April. The dividend yield will be 2.6% based on this payment which is still above the industry average.

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. Wabash National's stock price has reduced by 33% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Wabash National

Estimates Indicate Wabash National's Dividend Coverage Likely To Improve

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Wabash National isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 0.5%, which makes us pretty comfortable with the sustainability of the dividend.

Wabash National 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 2017, the dividend has gone from $0.24 total annually to $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Company Could Face Some Challenges Growing The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Wabash National has grown earnings per share at 10% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

Our Thoughts On Wabash National's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Wabash National's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Wabash National that investors should know about before committing capital to this stock. Is Wabash National 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.