Fluidra's (BME:FDR) Dividend Will Be Increased To €0.3402

The board of Fluidra, S.A. (BME:FDR) has announced that it will be paying its dividend of €0.3402 on the 3rd of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 6.4%.

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

Fluidra's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last dividend, Fluidra is earning enough to cover the payment, but then it makes up 1,715% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to fall by 6.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 72%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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. The annual payment during the last 10 years was €0.07 in 2012, and the most recent fiscal year payment was €0.85. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. Fluidra has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. We are encouraged to see that Fluidra has grown earnings per share at 34% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Fluidra's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for Fluidra (3 are significant!) that you should be aware of before investing. Is Fluidra not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.