Element Solutions (NYSE:ESI) Is Paying Out A Dividend Of $0.08

Element Solutions Inc (NYSE:ESI) has announced that it will pay a dividend of $0.08 per share on the 15th of December. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.

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Element Solutions' Future Dividend Projections Appear Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Element Solutions' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 72.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Element Solutions

Element Solutions Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was $0.20 in 2020, and the most recent fiscal year payment was $0.32. This means that it has been growing its distributions at 9.9% per annum over that time. Element Solutions has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Element Solutions has impressed us by growing EPS at 15% 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.

Element Solutions Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Element Solutions that you should be aware of before investing. Is Element Solutions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.