The board of The Gorman-Rupp Company (NYSE:GRC) has announced that it will pay a dividend on the 10th of March, with investors receiving $0.19 per share. This payment means that the dividend yield will be 1.5%, which is around the industry average.

Gorman-Rupp's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Gorman-Rupp was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 13.3%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Gorman-Rupp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2016, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.76. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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. We are encouraged to see that Gorman-Rupp has grown earnings per share at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Gorman-Rupp's prospects of growing its dividend payments in the future.

Gorman-Rupp Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Gorman-Rupp might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Is Gorman-Rupp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.