Yahoo Finance FMC (NYSE:FMC) Has Affirmed Its Dividend Of $0.58
The board of FMC Corporation (NYSE:FMC) has announced that it will pay a dividend of $0.58 per share on the 18th of July. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.
See our latest analysis for FMC
FMC's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, FMC was paying a whopping 139% as a dividend, but this only made up 24% 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 fall by 39.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 45%, which is comfortable for the company to continue in the future.
FMC Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.54 in 2014, and the most recent fiscal year payment was $2.32. This means that it has been growing its distributions at 16% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that FMC has been growing its earnings per share at 21% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FMC's payments, as there could be some issues with sustaining them into the future. While FMC is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
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. To that end, FMC has 4 warning signs (and 2 which can't be ignored) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
