Flowsparks (EBR:FLSP) Will Pay A Smaller Dividend Than Last Year

Flowsparks NV (EBR:FLSP) has announced that on 1st of October, it will be paying a dividend of€0.455, which a reduction from last year's comparable dividend. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.

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Flowsparks' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, earnings per share could rise by 12.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for Flowsparks

Flowsparks Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Flowsparks Might Find It Hard To Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Flowsparks has seen EPS rising for the last five years, at 12% per annum. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Strong earnings growth means Flowsparks has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Flowsparks you should be aware of, and 2 of them are significant. 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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