FMC Corporation (NYSE:FMC) has announced that it will pay a dividend of $0.58 per share on the 17th of July. The dividend yield will be 6.5% based on this payment which is still above the industry average.

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FMC's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, FMC's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 144% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, earnings per share is forecast to rise by 31.6% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

NYSE:FMC Historic Dividend May 7th 2025

See our latest analysis for FMC

FMC 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 $0.60 in 2015, and the most recent fiscal year payment was $2.32. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. FMC has seen earnings per share falling at 6.1% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FMC's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 4 warning signs for FMC (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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