Applied Industrial Technologies, Inc. (NYSE:AIT) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Applied Industrial Technologies' shares before the 15th of May in order to receive the dividend, which the company will pay on the 30th of May.

The company's upcoming dividend is US$0.46 a share, following on from the last 12 months, when the company distributed a total of US$1.84 per share to shareholders. Looking at the last 12 months of distributions, Applied Industrial Technologies has a trailing yield of approximately 0.8% on its current stock price of US$220.51. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Applied Industrial Technologies is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Applied Industrial Technologies generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last 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.

View our latest analysis for Applied Industrial Technologies

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:AIT Historic Dividend May 11th 2025

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Applied Industrial Technologies's earnings have been skyrocketing, up 22% per annum for the past five years. Applied Industrial Technologies looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Story Continues

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Applied Industrial Technologies has delivered an average of 6.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Applied Industrial Technologies an attractive dividend stock, or better left on the shelf? We love that Applied Industrial Technologies 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. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Applied Industrial Technologies you should be aware of.

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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