FMC (NYSE:FMC) Is Paying Out A Larger Dividend Than Last Year

The board of FMC Corporation (NYSE:FMC) has announced that it will be paying its dividend of $0.58 on the 19th of October, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

Check out our latest analysis for FMC

FMC's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, FMC was paying only paying out a fraction of earnings, but the payment was a massive 220% 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.

The next year is set to see EPS grow by 45.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

FMC Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.54 in 2013, and the most recent fiscal year payment was $2.32. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that FMC has been growing its earnings per share at 40% a year over the past five years. 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.

Our Thoughts On FMC's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While FMC is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for FMC (1 is a bit unpleasant!) that you should be aware of before investing. Is FMC 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.