Fortune Brands Innovations' (NYSE:FBIN) Shareholders Will Receive A Smaller Dividend Than Last Year

Fortune Brands Innovations, Inc. (NYSE:FBIN) is reducing its dividend from last year's comparable payment to $0.23 on the 13th of December. However, the dividend yield of 1.8% still remains in a typical range for the industry.

Check out our latest analysis for Fortune Brands Innovations

Fortune Brands Innovations Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Fortune Brands Innovations' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next 12 months is set to see EPS grow by 46.3%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Fortune Brands Innovations Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.40 in 2013 to the most recent total annual payment of $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Fortune Brands Innovations has only grown its earnings per share at 3.2% per annum over the past five years. If Fortune Brands Innovations is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Fortune Brands Innovations' Dividend

Overall, we think that Fortune Brands Innovations could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Fortune Brands Innovations that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.