Yahoo Finance Flowtech Fluidpower (LON:FLO) Will Pay A Larger Dividend Than Last Year At £0.022
Flowtech Fluidpower plc (LON:FLO) has announced that it will be increasing its periodic dividend on the 19th of July to £0.022, which will be 4.8% higher than last year's comparable payment amount of £0.021. This makes the dividend yield about the same as the industry average at 2.0%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Flowtech Fluidpower's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Flowtech Fluidpower
Flowtech Fluidpower's Distributions May Be Difficult To Sustain
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Even though Flowtech Fluidpower isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.
Looking forward, earnings per share could fall by 69.8% over the next year if the trend of the last few years can't be broken. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of £0.0334 in 2014 to the most recent total annual payment of £0.022. The dividend has shrunk at around 4.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Flowtech Fluidpower's EPS has declined at around 70% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Flowtech Fluidpower's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Flowtech Fluidpower's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Flowtech Fluidpower is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Flowtech Fluidpower has 3 warning signs (and 1 which can'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.
