TIMKEN CO (NYSE:TKR): A Reliable Dividend Stock with Strong Financials and Sustainable Yield

Dividend investors frequently look for steady, dependable companies that provide appealing yields while also showing the financial stability and earnings potential to maintain and increase their dividends. A useful way to find these stocks is by applying a dividend-focused screening method, which selects companies with strong dividend scores while also ensuring reasonable profitability and financial stability. This approach helps steer clear of high-yield risks—firms with unsustainable payouts—and instead focuses on those with reliable dividend records and sound financials.

TIMKEN CO (NYSE:TKR) appears as a stock worth considering under this method. The company, which produces engineered bearings and industrial motion products, has been identified by a "Best Dividend" screen that looks for stocks with a ChartMill Dividend Rating of 7 or higher, along with minimum Profitability and Health Ratings of 5. These standards confirm that the chosen companies not only reward shareholders but also have the necessary strength to keep those rewards intact.

Dividend Strength: Key Details

TIMKEN’s dividend profile is notable for several factors:

• Sustainable Payout Ratio: The company allocates 29.53% of its income to dividends, far below the warning level of 80%. This shows that earnings easily cover the dividend, lowering the chance of cuts even in tough economic times.
• Consistent History: TKR has distributed dividends for at least 10 straight years without cuts, demonstrating management’s dedication to sharing profits with shareholders.
• Steady Growth: Its annual dividend growth rate of 4.12% isn’t rapid, but it reflects a cautious, maintainable strategy—perfect for income-oriented investors.
• Attractive Yield: At 1.73%, TKR’s yield is a bit below the S&P 500 average (2.32%) but beats 80% of its machinery industry competitors, making it relatively appealing in its sector.

Profitability and Financial Health: Backing the Dividend

A high dividend score isn’t sufficient on its own; the company must also produce enough profits and maintain a strong financial position to support future payouts. TIMKEN’s Profitability Rating of 5 and Health Rating of 5 indicate it meets these basic standards:

• Profitability:
  • Operating Margin (12.79%) exceeds 62% of industry peers, showing efficient operations.
  • While Return on Equity (11.22%) and Return on Assets (4.98%) are in line with industry norms, they reveal no major inefficiencies.
• Financial Health:
  • Solid Liquidity: A Current Ratio of 3.15 (better than 79% of peers) means short-term bills are easily covered.
  • Controlled Debt: A Debt-to-Equity ratio of 0.72 is lower than industry averages, though the Debt-to-FCF ratio of 6.57 should be watched.

Valuation and Growth Factors

TIMKEN trades at a P/E of 15.07, less expensive than 82% of its industry peers and the S&P 500 (27.93). This implies the stock isn’t overvalued, though its growth outlook is modest:

• Revenue and EPS Growth: Both figures have dipped slightly over the past year, but analysts forecast 6% annual EPS growth and 1.8% revenue growth ahead—enough to support dividend hikes.

Why These Metrics Are Important

As explained in our dividend investing guide, sustainability is crucial. A low payout ratio, dependable dividend history, and solid profitability minimize the risk of cuts, while strong liquidity and debt metrics ensure the company can handle downturns. TIMKEN’s mixed growth profile may not appeal to growth-focused investors, but for those seeking dividends, its reliability and sector-comparative yield make it a strong option.

For a more detailed look at TIMKEN’s financials, check its full Fundamental Analysis Report.

Find More Dividend Opportunities

TIMKEN is just one of many stocks that fit these criteria. To uncover other high-quality dividend payers, try using the Best Dividend Stocks screen yourself—it’s an effective tool for spotting income-generating possibilities.

Disclaimer: This article is not investment advice. Always do your own research or consult a financial advisor before making investment decisions.