Fortune Brands Innovations' (NYSE:FBIN) Dividend Will Be Reduced To $0.23

Fortune Brands Innovations, Inc. (NYSE:FBIN) has announced that on 14th of July, it will be paying a dividend of$0.23, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 1.7% will still be comparable to other companies in the industry.

Check out our latest analysis for Fortune Brands Innovations

Fortune Brands Innovations Doesn't Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Fortune Brands Innovations' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 32.8%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Fortune Brands Innovations Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.40 in 2013 to the most recent total annual payment of $1.12. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Fortune Brands Innovations May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Fortune Brands Innovations has only grown its earnings per share at 4.9% per annum over the past five years. While EPS growth is quite low, Fortune Brands Innovations has the option to increase the payout ratio to return more cash to shareholders.

Fortune Brands Innovations Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Fortune Brands Innovations has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 1 warning sign for Fortune Brands Innovations that investors should know about before committing capital to this stock. Is Fortune Brands Innovations not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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