Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Parker-Hannifin Corporation (NYSE:PH) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Parker-Hannifin's shares on or after the 9th of May, you won't be eligible to receive the dividend, when it is paid on the 6th of June.

The company's next dividend payment will be US$1.80 per share, on the back of last year when the company paid a total of US$6.52 to shareholders. Calculating the last year's worth of payments shows that Parker-Hannifin has a trailing yield of 1.1% on the current share price of US$619.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

We've discovered 1 warning sign about Parker-Hannifin. View them for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Parker-Hannifin is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 27% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Parker-Hannifin

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:PH Historic Dividend May 4th 2025

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Parker-Hannifin's earnings per share have been growing at 18% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Story Continues

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Parker-Hannifin has lifted its dividend by approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Parker-Hannifin got what it takes to maintain its dividend payments? We love that Parker-Hannifin is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Parker-Hannifin looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Parker-Hannifin is facing. For example, we've found 1 warning sign for Parker-Hannifin that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

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