The board of Mueller Water Products, Inc. (NYSE:MWA) has announced that it will pay a dividend of $0.058 per share on the 22nd of August. This means the dividend yield will be fairly typical at 1.8%.

Check out our latest analysis for Mueller Water Products

Mueller Water Products' Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Mueller Water Products' dividend was only 47% of earnings, however it was paying out 98% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 66.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Mueller Water Products Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.07 in 2012 to the most recent total annual payment of $0.232. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Mueller Water Products has impressed us by growing EPS at 14% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Mueller Water Products' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Mueller Water Products that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.