The board of The Timken Company (NYSE:TKR) has announced that it will be increasing its dividend by 3.0% on the 28th of May to $0.34, up from last year's comparable payment of $0.33. This makes the dividend yield about the same as the industry average at 1.5%.

Check out our latest analysis for Timken

Timken's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Timken's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 37.7% over the next year. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Timken Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.92, compared to the most recent full-year payment of $1.32. This means that it has been growing its distributions at 3.7% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Timken's Dividend Growing

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 Timken has grown earnings per share at 5.4% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Timken's prospects of growing its dividend payments in the future.

We Really Like Timken's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

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 1 warning sign for Timken that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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.