Fluidra (BME:FDR) Will Pay A Smaller Dividend Than Last Year

Fluidra, S.A. (BME:FDR) has announced that on 3rd of December, it will be paying a dividend of€0.2025, which a reduction from last year's comparable dividend. This means that the dividend yield is 2.1%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Fluidra

Fluidra's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment made up 86% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 131.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 34% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from €0.07 total annually to €0.55. This means that it has been growing its distributions at 23% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

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. Slow growth and a high payout ratio could mean that Fluidra has maxed out the amount that it has been able to pay to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Fluidra that investors should know about before committing capital to this stock. 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.