Quaker Chemical's (NYSE:KWR) Upcoming Dividend Will Be Larger Than Last Year's

Quaker Chemical Corporation (NYSE:KWR) will increase its dividend from last year's comparable payment on the 31st of October to $0.508. Even though the dividend went up, the yield is still quite low at only 1.5%.

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Quaker Chemical's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Quaker Chemical's Could Struggle to Maintain Dividend Payments In The Future

Quaker Chemical's Future Dividends May Potentially Be At Risk

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Quaker Chemical isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 448%, which is unsustainable.

Check out our latest analysis for Quaker Chemical

Quaker Chemical Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.20 in 2015, and the most recent fiscal year payment was $2.03. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Quaker Chemical's Dividend Growing

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. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

Our Thoughts On Quaker Chemical's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Quaker Chemical 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Quaker Chemical you should be aware of, and 1 of them is concerning. 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.