Watts Water Technologies' (NYSE:WTS) Upcoming Dividend Will Be Larger Than Last Year's

Watts Water Technologies, Inc. (NYSE:WTS) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of June to $0.43. Even though the dividend went up, the yield is still quite low at only 0.8%.

See our latest analysis for Watts Water Technologies

Watts Water Technologies' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Watts Water Technologies' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 21.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Watts Water Technologies Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.52, compared to the most recent full-year payment of $1.72. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Watts Water Technologies has been growing its earnings per share at 16% a year over the past five years. Watts Water Technologies definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Watts Water Technologies Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Watts Water Technologies that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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