Zurn Elkay Water Solutions (NYSE:ZWS) Has Affirmed Its Dividend Of $0.08

Zurn Elkay Water Solutions Corporation (NYSE:ZWS) will pay a dividend of $0.08 on the 7th of March. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.

View our latest analysis for Zurn Elkay Water Solutions

Zurn Elkay Water Solutions' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Zurn Elkay Water Solutions' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 66.7% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Zurn Elkay Water Solutions' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The last annual payment of $0.32 was flat on the annual payment from4 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Zurn Elkay Water Solutions' EPS has fallen by approximately 22% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Zurn Elkay Water Solutions' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Zurn Elkay Water Solutions' payments, as there could be some issues with sustaining them into the future. 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 Zurn Elkay Water Solutions is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Zurn Elkay Water Solutions 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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