In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see FMC Corporation (NYSE:FMC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase FMC's shares before the 30th of December in order to receive the dividend, which the company will pay on the 20th of January.
The company's next dividend payment will be US$0.53 per share, on the back of last year when the company paid a total of US$1.92 to shareholders. Calculating the last year's worth of payments shows that FMC has a trailing yield of 1.9% on the current share price of $109.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether FMC can afford its dividend, and if the dividend could grow.
View our latest analysis for FMC
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately FMC's payout ratio is modest, at just 40% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that FMC's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see FMC has grown its earnings rapidly, up 38% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, FMC has increased its dividend at approximately 22% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.