Fluidra's (BME:FDR) Shareholders Will Receive A Smaller Dividend Than Last Year

Fluidra, S.A. (BME:FDR) is reducing its dividend from last year's comparable payment to €0.243 on the 3rd of July. However, the dividend yield of 2.9% still remains in a typical range for the industry.

Check out our latest analysis for Fluidra

Fluidra's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Fluidra's dividend made up quite a large proportion of earnings but only 29% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 108.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 51% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was €0.07, compared to the most recent full-year payment of €0.55. This means that it has been growing its distributions at 23% 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.

Fluidra's Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Fluidra has impressed us by growing EPS at 36% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Fluidra hasn't been doing.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Fluidra that you should be aware of before investing. 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.