Franklin Electric Co., Inc. (NASDAQ:FELE) Passed Our Checks, And It's About To Pay A US$0.23 Dividend
Readers hoping to buy Franklin Electric Co., Inc. (NASDAQ:FELE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Franklin Electric's shares before the 1st of November to receive the dividend, which will be paid on the 16th of November.
The company's next dividend payment will be US$0.23 per share. Last year, in total, the company distributed US$0.90 to shareholders. Calculating the last year's worth of payments shows that Franklin Electric has a trailing yield of 1.1% on the current share price of $85.19. If you buy this business for its dividend, you should have an idea of whether Franklin Electric's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Franklin Electric
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Franklin Electric has a low and conservative payout ratio of just 21% of its income after tax. A useful secondary check can be to evaluate whether Franklin Electric generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
It's positive to see that Franklin Electric'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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Franklin Electric has grown its earnings rapidly, up 20% a year for the past five years. Franklin Electric earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Franklin Electric has increased its dividend at approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Franklin Electric an attractive dividend stock, or better left on the shelf? Franklin Electric has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Franklin Electric looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Franklin Electric is facing. For example, we've found 1 warning sign for Franklin Electric that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
