Dover Corporation (NYSE:DOV) has announced that it will pay a dividend of $0.515 per share on the 14th of March. The dividend yield is 1.0% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Dover

Dover's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Dover's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 10.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 23%, which is comfortable for the company to continue in the future.

Dover Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $1.50 total annually to $2.06. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Dover has been growing its earnings per share at 17% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Dover Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Dover might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Dover has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.