Flow Traders (AMS:FLOW) Has Announced That Its Dividend Will Be Reduced To €0.35

Flow Traders N.V. (AMS:FLOW) is reducing its dividend to €0.35 on the 6th of May. The dividend yield of 4.3% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Flow Traders

Flow Traders' Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Flow Traders' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 0.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 62%, which is comfortable for the company to continue in the future.

Flow Traders' Dividend Has Lacked Consistency

Flow Traders has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2015, the first annual payment was €1.00, compared to the most recent full-year payment of €1.35. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Flow Traders Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Flow Traders has grown earnings per share at 8.6% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Flow Traders' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Flow Traders does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

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 picked out 2 warning signs for Flow Traders 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.