The board of Fortune Brands Innovations, Inc. (NYSE:FBIN) has announced that it will pay a dividend of $0.24 per share on the 11th of December. Including this payment, the dividend yield on the stock will be 1.1%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Fortune Brands Innovations' stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Fortune Brands Innovations

Fortune Brands Innovations' Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Fortune Brands Innovations' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 60.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Fortune Brands Innovations Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.48, compared to the most recent full-year payment of $0.93. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Fortune Brands Innovations May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Fortune Brands Innovations has only grown its earnings per share at 4.6% per annum over the past five years. If Fortune Brands Innovations is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Fortune Brands Innovations' Dividend

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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Fortune Brands Innovations that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.