Quaker Chemical (NYSE:KWR) Is Increasing Its Dividend To $0.435

Quaker Chemical Corporation's (NYSE:KWR) dividend will be increasing from last year's payment of the same period to $0.435 on 31st of October. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

View our latest analysis for Quaker Chemical

Quaker Chemical's Dividend Is Well Covered By Earnings

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, Quaker Chemical was paying a whopping 103% as a dividend, but this only made up 29% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 32.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Quaker Chemical Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from $0.96 total annually to $1.66. This implies that the company grew its distributions at a yearly rate of about 5.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Growth Potential

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 Quaker Chemical has been growing its earnings per share at 6.4% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Quaker Chemical's Dividend

Overall, we always like to see the dividend being raised, but we don't think Quaker Chemical will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for Quaker Chemical (1 is a bit concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.