The Eastern Company's (NASDAQ:EML) investors are due to receive a payment of $0.11 per share on 14th of March. This means that the annual payment will be 1.6% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Eastern

Eastern's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, Eastern's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 0.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 22%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Eastern 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 payments haven't really changed that much since 10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Eastern May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Eastern hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Eastern 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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