Sustainability check – cash‑flow vs payout
Flowserve’s board has just approved a $0.21 quarterly cash dividend. With the stock trading around the $84‑$86 range, the payout translates to a roughly 2.5 % annualised yield (≈ $0.84 per share per year). In the most recent quarter Flowserve reported net earnings of about $0.71 per share and generated operating cash flow of roughly $1.1 billion, which comfortably covered the $0.21 per‑share dividend (≈ 30 % of earnings and about 35 % of operating cash flow). Historically the company has kept its payout ratio in the 30‑40 % band, well below the cash‑flow‑to‑dividend threshold that would force a cut. The balance sheet still shows a solid liquidity position (cash & equivalents > $1.5 billion) and a manageable debt load, so the dividend is funded from internal cash rather than external financing.
Trading implications
- Fundamentals: The current payout ratio is comfortably sustainable; there’s no sign of strain on cash generation, and management has a track record of preserving dividend consistency even during cyclical downturns in the industrial sector.
- Technical view: The stock is holding above its 50‑day SMA and has found support near the $82 level, while the 200‑day SMA sits around $78. A modest pull‑back toward $82‑$84 could present a lower‑‑cost entry for dividend‑seeking investors.
- Actionable stance: For investors looking for a modest yield with upside potential, a buy on dips around $82–$84 is reasonable, with the expectation that the dividend will be maintained for the next 12 months. If the price breaks below $80 and cash‑flow fundamentals start to weaken (e.g., earnings contraction or a drop in operating cash flow), consider tightening stops or trimming the position, as that could signal pressure on the payout ratio.