Rockwell Automation, Inc. (NYSE:ROK) declared a dividend of 42.5 cents per share payable on March 12, 2012 to shareholders of record as of February 21, 2012.
Rockwell Automation, which makes industrial automation products such as motor starters and contactors, relays, timers, signaling devices, has paid dividends since 1948 and has a current dividend yield of 2.1 percent. Rockwell's five-year annual dividend growth rate came in at 10.38 percent.
The dividend yield is lower than 10-year yield of 2.23 percent offered on bonds issued by US Treasury. However, it is greater than the 5-year Treasury yield of 1.04 percent.
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ROK's yield is more than the 5-year and 10-year AAA rated municipal and corporate bonds. The yield on 5-year AAA rated municipal bond works out to 0.98 percent and 10-year AAA rated municipal bonds at 1.61 percent.
Five-year and 10-year AAA rated corporate bonds offer yields of 2.46 percent and 4.28 percent, respectively.
Based on its 2011 results, Rockwell is paying 35 percent of its earnings in the form of dividends. This implies that the company has further room to increase its dividend payout.
However, the company should consider increasing its dividend as the current yield trails the returns offered by Treasury bonds. Investors consider dividend yield as a key metric in gauging the total-return from a dividend stock.
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Our Take: Rockwell Automation has a decent yield and a modest payout ratio. However, its yield may not interest investors as they could wait for a pull back in the share price to receive a higher yield. In addition, the company may think of increasing its payout ratio given its strong earnings growth.