Fluidra (BME:FDR) Is Increasing Its Dividend To €0.3402

Fluidra, S.A. (BME:FDR) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of November to €0.3402. Based on this payment, the dividend yield for the company will be 5.8%, which is fairly typical for the industry.

Check out the opportunities and risks within the ES Machinery industry.

Fluidra's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last dividend, Fluidra is earning enough to cover the payment, but then it makes up 1,715% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 18.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 57% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was €0.07, compared to the most recent full-year payment of €0.85. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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. Fluidra has impressed us by growing EPS at 34% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Fluidra could prove to be a strong dividend payer.

Our Thoughts On Fluidra's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Fluidra's payments are rock solid. While Fluidra is earning enough to cover the payments, the cash flows are lacking. We don't think Fluidra is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Fluidra you should be aware of, and 2 of them make us uncomfortable. 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.