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Important news for shareholders and potential investors in Flowtech Fluidpower plc (LON:FLO): The dividend payment of UK£0.02 per share will be distributed to shareholders on 26 October 2018, and the stock will begin trading ex-dividend at an earlier date, 27 September 2018. Is this future income a persuasive enough catalyst for investors to think about Flowtech Fluidpower as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

View our latest analysis for Flowtech Fluidpower

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is their annual yield among the top 25% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has the amount of dividend per share grown over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does Flowtech Fluidpower fit our criteria?

Flowtech Fluidpower has a trailing twelve-month payout ratio of 56.9%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 38.3%, leading to a dividend yield of 5.2%. However, EPS should increase to £0.14, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Flowtech Fluidpower as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Flowtech Fluidpower generates a yield of 4.8%, which is high for Trade Distributors stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then Flowtech Fluidpower is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key aspects you should look at: