Whirlpool (NYSE:WHR) Will Pay A Smaller Dividend Than Last Year

Whirlpool Corporation (NYSE:WHR) is reducing its dividend from last year's comparable payment to $0.90 on the 15th of September. The dividend yield of 4.1% is still a nice boost to shareholder returns, despite the cut.

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Whirlpool's Future Dividend Projections Seem Positive

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Whirlpool is not generating a profit, and despite this is paying out most of its free cash flow as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, so there isn't too much pressure on the dividend.

See our latest analysis for Whirlpool

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $3.00 in 2015, and the most recent fiscal year payment was $3.60. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. 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.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Whirlpool's EPS has fallen by approximately 34% per year during the past 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.

Whirlpool's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Whirlpool 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Whirlpool you should be aware of, and 1 of them is a bit unpleasant. Is Whirlpool 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.