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

The board of Zurn Elkay Water Solutions Corporation (NYSE:ZWS) has announced that it will pay a dividend of $0.08 per share on the 7th of June. This payment means the dividend yield will be 1.0%, which is below the average for the industry.

Check out our latest analysis for Zurn Elkay Water Solutions

Zurn Elkay Water Solutions' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Zurn Elkay Water Solutions was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 82.8%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Zurn Elkay Water Solutions' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The payments haven't really changed that much since 4 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 16% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Zurn Elkay Water Solutions 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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