Element Solutions (NYSE:ESI) Has Affirmed Its Dividend Of $0.08

Element Solutions Inc (NYSE:ESI) has announced that it will pay a dividend of $0.08 per share on the 16th of June. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.

We've discovered 2 warning signs about Element Solutions. View them for free.

Element Solutions' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Element Solutions was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 8.5% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Element Solutions

Element Solutions Doesn't Have A Long Payment History

It is great to see that Element Solutions has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the dividend has gone from $0.20 total annually to $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Element Solutions has grown earnings per share at 27% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Element Solutions' Dividend

Overall, we like to see the dividend staying consistent, and we think Element Solutions might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Element Solutions that investors need to be conscious of moving forward. Is Element Solutions not quite the opportunity you were looking for? Why not check out our selection of top 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.