Astec Industries (NASDAQ:ASTE) Is Paying Out A Dividend Of $0.13

The board of Astec Industries, Inc. (NASDAQ:ASTE) has announced that it will pay a dividend on the 29th of August, with investors receiving $0.13 per share. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.

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Astec Industries' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before this announcement, Astec Industries was paying out 78% of earnings, but a comparatively small 17% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 72.1%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 47% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Astec Industries

Astec Industries Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.40 in 2015, and the most recent fiscal year payment was $0.52. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Astec Industries' earnings per share has shrunk at 12% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

Our Thoughts On Astec Industries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Astec Industries' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 Astec Industries that investors need to be conscious of moving forward. 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.