Zurn Elkay Water Solutions (NYSE:ZWS) Is Paying Out A Dividend Of $0.09

Zurn Elkay Water Solutions Corporation's (NYSE:ZWS) investors are due to receive a payment of $0.09 per share on 5th of September. Including this payment, the dividend yield on the stock will be 0.9%, which is a modest boost for shareholders' returns.

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Zurn Elkay Water Solutions' Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Zurn Elkay Water Solutions was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 31.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Zurn Elkay Water Solutions

Zurn Elkay Water Solutions' Dividend Has Lacked Consistency

Looking back, Zurn Elkay Water Solutions' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of $0.32 in 2019 to the most recent total annual payment of $0.36. This implies that the company grew its distributions at a yearly rate of about 2.0% over that duration. 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Zurn Elkay Water Solutions has seen EPS rising for the last five years, at 89% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Zurn Elkay Water Solutions' Dividend

Overall, we like to see the dividend staying consistent, and we think Zurn Elkay Water Solutions might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Zurn Elkay Water Solutions analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Zurn Elkay Water Solutions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.