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H.B. Fuller Company (NYSE:FUL) will pay a dividend of US$0.17 on the 29th of July. This payment means the dividend yield will be 1.0%, which is below the average for the industry.
H.B. Fuller's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, H.B. Fuller's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 20.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
H.B. Fuller Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was US$0.28, compared to the most recent full-year payment of US$0.67. This means that it has been growing its distributions at 9.1% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See H.B. Fuller's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that H.B. Fuller has grown earnings per share at 8.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like H.B. Fuller's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for H.B. Fuller (of which 1 is a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
This article by Simply Wall St is general in nature. 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.
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