Fluidra (BME:FDR) Is Increasing Its Dividend To €0.34

Fluidra, S.A. (BME:FDR) has announced that it will be increasing its dividend on the 3rd of November to €0.34. The announced payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

View our latest analysis for Fluidra

Fluidra's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Fluidra's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 17.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was €0.07, compared to the most recent full-year payment of €0.85. This means that it has been growing its distributions at 28% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Growth of per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Fluidra's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 3 warning signs for Fluidra that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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.