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Quaker Chemical Corporation (NYSE:KWR) will increase its dividend from last year's comparable payment on the 31st of October to $0.455. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.
View our latest analysis for Quaker Chemical
Quaker Chemical's Distributions May Be Difficult To Sustain
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Quaker Chemical isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Looking forward, earnings per share is forecast to expand by 61.7% over the next year. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.
Quaker Chemical 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 $0.98 in 2013, and the most recent fiscal year payment was $1.74. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
We Could See Quaker Chemical's Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Quaker Chemical has been growing its earnings per share at 5.8% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.
Our Thoughts On Quaker Chemical's Dividend
Overall, we always like to see the dividend being raised, but we don't think Quaker Chemical will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.