Gentex Corporation (NASDAQ:GNTX) will pay a dividend of $0.12 on the 23rd of April. Based on this payment, the dividend yield will be 2.1%, which is fairly typical for the industry.

Gentex's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Gentex's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 41.4%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Gentex

Gentex Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.32 in 2015 to the most recent total annual payment of $0.48. This means that it has been growing its distributions at 4.1% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Gentex May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Gentex's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Gentex could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Gentex's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Gentex for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.