FMC Corporation's (NYSE:FMC) investors are due to receive a payment of $0.58 per share on 17th of October. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.
See our latest analysis for FMC
FMC's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, FMC was paying only paying out a fraction of earnings, but the payment was a massive 139% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
EPS is set to fall by 45.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 50%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
FMC Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.54, compared to the most recent full-year payment of $2.32. This implies that the company grew its distributions at a yearly rate of about 16% 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
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. FMC has seen EPS rising for the last five years, at 21% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Our Thoughts On FMC's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FMC's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, FMC has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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About NYSE:FMC
FMC
An agricultural sciences company, provides crop protection, plant health, and professional pest and turf management products.
6 star dividend payer and undervalued.
