Yahoo Finance FMC's (NYSE:FMC) Upcoming Dividend Will Be Larger Than Last Year's
FMC Corporation's (NYSE:FMC) dividend will be increasing from last year's payment of the same period to $0.58 on 20th of July. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.
Check out our latest analysis for FMC
FMC's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, FMC was paying a whopping 149% as a dividend, but this only made up 34% 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.
Looking forward, earnings per share is forecast to rise by 42.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.
FMC Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.36 total annually to $2.32. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. FMC has seen EPS rising for the last five years, at 56% per annum. 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.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think FMC's payments are rock solid. While FMC is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, FMC has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.
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